October’s flash purchasing managers’ indices (PMIs) put inflation back at the centre of the fourth-quarter story. US selling prices rose at their fastest rate since August 2022 as strong demand, rising backlogs and supply delays gave companies more room to pass higher costs to customers.

Inflation pressure was visible elsewhere. Costs rose faster in the eurozone and the UK, while Australia combined shrinking activity with steeper charges. Japan’s operating expenses climbed sharply too. India was the exception, with growth accelerating as inflation cooled.

Composite readings put the US at the top on 57.6, followed by India at 56.7. The UK reached 53.1, Japan 52.3 and the eurozone 51.9. With 50 marking the line between growth and contraction, Australia’s 47.7 was the sole reading on the wrong side.

The test now is how much of the higher energy, freight, raw material and wage bill customers will bear. Full US order books give companies room to raise prices, and the UK’s rebound offers some cover. Softer eurozone demand and Australia’s downturn make every price rise riskier.

US demand raises the inflation stakes

US private sector output remained the strongest among the economies surveyed. The composite index eased from 58.4 in September to 57.6, but still recorded its second-highest reading since March 2022. Services activity reached 57.9 and manufacturing output 55.8, leaving both sectors among their strongest performances of the past five years.

Chris Williamson, chief business economist at S&P Global, put that pace in context: “October’s flash PMI data indicate that the US economy continues to boom at the start of the fourth quarter. The output readings from the survey are consistent with GDP growing at a 5% annualised rate after a 4% expansion was signalled for the third quarter.”

The boom came with an inflation sting. US selling charges rose at the fastest rate since August 2022, while input costs stayed near a four-year high. Service providers and manufacturers both raised prices sharply, spreading the pressure across the private sector. With growth and prices firm together, the case for keeping interest rates restrictive has strengthened.

UK rebounds as eurozone growth cools

The UK produced October’s clearest positive growth surprise. Its composite index rose from 52.0 to 53.1, an eight-month high, while services matched that reading and manufacturing output jumped from 51.5 to a 25-month high of 53.1. The headline manufacturing PMI also reached a five-month high of 52.8.

Williamson said the UK economy had “picked up momentum in October, with early PMI data indicating the strongest rate of growth since February”. He also pointed to the first increase in employment since hiring was hit by the 2024 Autumn Budget, although the rise in staffing was marginal and confined to services.

Eurozone growth cooled at the start of the quarter. Its composite index fell from 53.1 to a four-month low of 51.9, with manufacturing output easing to 52.4 and services activity to 51.7. Germany and the rest of the currency area continued to expand, but France returned to contraction after September’s first increase in activity for ten months.

Despite that loss of speed, Williamson said the eurozone PMI remained consistent with quarterly GDP growth of 0.3%. He described this as below September’s pace but “still among some of the best performances seen over the past three years”.

Japan held steady at 52.3, extending its expansion to a nineteenth month, albeit at the joint-weakest pace since May. Faster services growth offset a slowdown in manufacturing output, which fell from 54.9 to 53.1. India moved the other way, climbing from 55.9 to 56.7, its highest reading since June, as factories and service providers both raised output more quickly.

Australia recorded the only outright decline. Its composite index dropped 3.6 points to 47.7, the lowest since March, as services joined manufacturing in contraction. Services activity fell from 51.9 to 47.8, while manufacturing output remained weak at 46.5 despite edging up from September.

Order books broaden the fourth-quarter expansion

Fresh demand gave the US boom firmer foundations. New business grew at the fastest rate in more than four-and-a-half years, with service sector orders at their strongest since March 2022. Manufacturing orders slowed but remained elevated, while domestic demand continued to drive most of the growth.

Export demand strengthened too. US export orders recorded their largest increase since May 2022, including the first rise in goods exports since June 2025 and the strongest services export growth since July 2023. The UK reported its sharpest increase in total new work for 25 months, supported by gains in both domestic and export markets. Technology services and AI investment were among the sources of demand cited by UK respondents.

Across the eurozone, new orders increased for a fourth month but only slightly. Export business, including trade within the currency area, rose for a third consecutive month after almost four-and-a-half years of uninterrupted decline. The rise in export orders was stronger than the increase in total business, giving manufacturers some support as domestic demand softened.

India recorded a quicker rise in total orders and its strongest export growth in six months, with respondents citing customers in the US, UK, Middle East and Bangladesh. Pranjul Bhandari, chief India economist at HSBC, said: “The steady pace of new order growth masks the fastest increase in new export orders since June 2025. Manufacturers responded by increasing their stocks of purchases and finished goods.”

Orders still rose in Japan, but more slowly. Total new work grew at the slowest pace in three months, and export orders grew at their weakest rate in four months. Services gained speed, but manufacturers recorded their smallest increase in orders since March. In Australia, overall demand barely grew, goods orders fell more sharply and overseas business was broadly unchanged.

Weak confidence, higher borrowing costs and inflation all weighed on Australian demand. Thin order books leave businesses there far less scope than their US or Indian peers to recover rising operating costs through prices.

Hiring follows pressure on capacity

US employers kept hiring as order books swelled. Employment rose at the second-fastest rate for more than four years, surpassed only by September. Manufacturing payrolls expanded at their quickest pace since March 2012, while services recorded their third-largest jobs increase in more than four years.

Backlogs help explain that hiring. Uncompleted US orders accumulated at the fastest rate since May 2022 across both sectors, indicating that demand continued to exceed available capacity even after companies added staff. Those unfinished orders should keep firms busy in the near term, but they also add to payroll costs and strengthen pricing power.

Employment in the UK rose for the first time since September 2024, ending a two-year run of job losses. Service providers added staff as new projects arrived, while manufacturers slightly reduced hiring. Backlogs continued to fall, however. The tentative return to hiring looks like a vote of confidence, with spare capacity still available.

Hiring barely changed across the eurozone after two months of slight growth. Services created jobs at the slowest rate for five months and factory employment edged down. Germany and the rest of the euro area added staff, but France cut headcount again as activity and confidence deteriorated.

India’s strong output translated into only marginal job creation, the weakest of 2026 so far. Services employment was unchanged after nine months of expansion, and manufacturers added staff only slightly. Backlogs fell at the joint-fastest rate since August 2021, suggesting existing teams had enough capacity to absorb new orders.

Japan also became more restrained. Hiring slowed to a 14-month low even though outstanding work rose at the fastest pace since June. Manufacturers increased employment moderately, but services cut payrolls for the first time since August 2025. Australian firms added staff despite falling output, as service providers responded to backlogs that had accumulated at their fastest rate for 18 months.

Stockbuilding returns as delivery delays lengthen

As deliveries slowed, manufacturers in several major markets began rebuilding their buffers. US supplier delivery times lengthened the most since 2022 as shortages, low inventories, overloaded vendors, and shipping delays impeded production. Manufacturers increased input stocks at the fastest rate for four months, while precautionary buying also supported domestic orders.

Eurozone factories raised purchasing at the joint-fastest pace in almost four-and-a-half years, matching the burst of safety stock-building seen when the Middle East war began. Purchase stocks rose for the first time in almost four years, even as supplier lead times deteriorated the most in four months.

India accumulated inventory even as supplier delivery times shortened. Manufacturers increased input stocks at the strongest rate for eight months and finished goods inventories at the fastest rate on record. Stronger orders encouraged some of that build, but falling backlogs and modest hiring show that Indian factories had more spare capacity than their US counterparts.

Japan’s manufacturers also built stocks of purchases at the quickest rate in almost four years as buying increased, and deliveries lengthened substantially. Australia reduced purchasing in line with weaker orders, leaving its producers more exposed to worsening lead times. UK manufacturers likewise ran down input stocks for a fifth month and cut finished goods inventories at the fastest rate since June 2025 while international shipping delays and shortages of semiconductors and electronics intensified.

Those stock decisions will show up quickly in cash. Bigger buffers pull money forward in the operating cycle but buy protection when deliveries slip. Leaner inventories free cash, shifting the pressure from the balance sheet to the production line.

Energy and freight revive cost pressure

Costs were climbing again across most of the markets surveyed. US selling prices rose at the fastest rate since August 2022, with service charges matching that high and factory prices recording their sharpest increase since July 2022. Input costs were also close to a four-year high as energy, freight, wages, insurance and materials became more expensive.

American companies had both reason and room to pass those costs through. Strong new orders, rising backlogs and capacity pressure gave firms more scope to raise prices than peers in slower markets. Williamson warned that bottlenecks and growing order books were “making it easier for companies to pass higher costs on to customers”, pushing the survey’s selling-price measure to a level consistent with consumer inflation moving further above the Federal Reserve’s target.

Eurozone manufacturers faced their strongest input inflation since May as energy, fuel and transport bills rose. Selling price inflation nonetheless slowed, with weaker increases in Germany and France. Pressure was building in the UK too: private sector input inflation reached its highest since June, led by manufacturing, even as the rise in charges eased slightly from September.

Recessionary readings coincided with faster inflation in Australia. Input cost growth was the strongest since May and selling prices accelerated for a second month as companies cited energy, shipping, commodities and wages. Jingyi Pan, economics associate director at S&P Global Market Intelligence, said: “October’s PMI prices data indicated that inflation could remain elevated in the coming months with both input costs and output prices rising at faster rates across both broad sectors tracked.”

Japan’s input costs also rose faster as raw materials and labour became dearer, although selling price inflation eased to a four-month low. Usamah Bhatti, economist at S&P Global Market Intelligence, described inflation as “a key downside risk to the private sector” and said it would be important to watch domestic demand after the Bank of Japan raised its policy rate to 1.25%, the highest since 1995.

India broke the pattern. Input cost growth eased for a seventh month to its lowest in almost a year, while output price inflation fell to its weakest since March 2025. Factory selling prices rose at their slowest pace in almost four years, easing the pressure on customers and margins as output accelerated.

Higher rates meet fragile confidence

Higher borrowing costs are beginning to bite just as inflation picks up again. Australian businesses blamed them for weaker demand, and eurozone respondents reported a similar drag. UK companies faced the same pressure alongside energy risks, cost-of-living strains and fiscal uncertainty.

Central banks face the hardest choices where growth and inflation remain firm together. Williamson said the eurozone combination would encourage speculation about more aggressive tightening by the European Central Bank. On the UK results, he said elevated prices made a rate rise at the Bank of England’s next meeting “a near certainty” and could increase the likelihood of further moves in 2027. The US survey likewise showed activity and prices running well above levels associated with a comfortable return to the Federal Reserve’s inflation target.

Business confidence softened in most of the economies covered. US expectations eased from September but remained the second-highest of the year, with manufacturers more optimistic than service providers. UK sentiment improved slightly yet stayed below its long-run average. Eurozone confidence fell to a five-month low, driven by French political instability, while Australian optimism was the weakest since June and Japanese sentiment its lowest since July.

Indian businesses became more upbeat, with confidence at its strongest since May, though still below the 2026 average. Rapid output growth, stronger exports and cooling inflation gave them the cleanest start to the final quarter. Hiring remained cautious, however, and record finished goods inventories could weigh on cash if demand falls short.

Pricing power shapes the quarter ahead

A booming US economy comes with a mounting bill. Capacity is stretched, hiring is rapid, and selling prices are rising at their fastest pace for more than four years. India is expanding almost as quickly while inflation cools. The UK has restored growth in orders and employment, although costs are climbing there too.

Eurozone businesses have less room to manoeuvre, with input costs accelerating as order growth and selling price inflation lose speed. Japan continues to grow steadily, but its factories are cooling. Australia faces the hardest squeeze: activity is contracting while costs and charges rise.

Cash is already reflecting those pressures. US companies are spending more on people and inventory, but buoyant demand gives them room to pass the cost on to customers. UK and eurozone businesses have less cover, and any further energy or supply shock would add to bills before they sell the resulting goods. Through the final quarter, the depth of customer demand will decide who can defend margins and who must absorb the increase.