By Xavier Fontdegloria
Business activity in the U.S. private sector continued to grow at an unprecedented pace in May but cost pressures kept mounting amid widespread supply problems.
The flash reading for the U.S. Composite Output Index was 68.1 in May, up from 63.5 in April, preliminary data from IHS Markit showed Friday. The reading surpassed April's previous series record high, IHS Markit said.
The indicator is based on data from the firm's PMI surveys for manufacturing and services sectors. For May, growth was driven by the fastest service sector upturn on record, with the increase in manufacturing output also accelerating amid stronger client demand.
"The U.S. economy saw a spectacular acceleration of growth in May, the rate of expansion of business activity soaring well above anything previously recorded in recent history as the economy continued to reopen from Covid-19 restrictions," said Chris Williamson, chief business economist at IHS Markit.
Goods producers and service providers alike noted stronger paces of activity growth midway through the second quarter.
IHS Markit's flash U.S. Services Business Activity Index was 70.1 in May, up from 64.7 in April and a series record high. Economists polled by The Wall Street Journal expected the indicator to come in at 64.3.
Services firms linked the upturn to stronger client demand amid greater customer confidence and the reopening of non-essential businesses, the report said.
New order growth also accelerated to the fastest on record, while total sales were supported by the sharpest increase in new export business since August 2020.
The IHS Markit Flash Manufacturing PMI was 61.5 in May, up from 60.5 in April and a series record high. Economists expected the U.S. Manufacturing PMI flash reading to remain unchanged from the prior month.
The uptick in the headline figure was supported by faster expansions in output and new orders, with new orders also rising at the sharpest rate on record, IHS Markit said.
Strong demand came with increased cost burdens often linked to a worsening of supplier performance.
"Growth would have been even stronger had it not been for businesses often being constrained by supply shortages and difficulties filling vacancies," Mr. Williamson said.
The rise in costs fed through to the sharpest increase in output charges since data collection began in October 2009, with record rates of inflation registered for both goods and services as soaring demand boosted firms' pricing power, the report said.
Write to Xavier Fontdegloria at firstname.lastname@example.org
(END) Dow Jones Newswires
May 21, 2021 10:23 ET (14:23 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.