U.S. private sector firms signalled a robust and accelerated rise in business activity during May, which adds to evidence of a sustained growth rebound in the second quarter of 2018.
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At 55.7 in May, up from 54.9 in April, the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index was the highest for three months and well above the crucial 50.0 no-change value.
A faster rise in service sector output was the key factor behind the acceleration in overall business activity.
Manufacturing production increased markedly, but at a slightly softer pace than in April.
Another strong upturn in new business volumes helped to boost output growth in May.
Survey respondents commented on resilient domestic demand and a supportive economic backdrop.
Higher workloads contributed to the sharpest rise in unfinished business since March 2015.
A solid rate of employment growth was maintained across the private sector in May, which was linked to long-term business expansion plans and upbeat projections of client demand in the coming months.
The index measuring business expectations for the year ahead held close to the 35-month peak seen in April.
May data revealed a sharp and accelerated rise in operating expenses across the private sector economy.
The latest increase in average input prices was the fastest since July 2013.
Anecdotal evidence mainly cited higher prices for metals (especially steel) and increased oil-related costs during the latest survey period.
The composite index is based on original survey data from the IHS Markit U.S. Services PMI and the IHS Markit U.S. Manufacturing PMI.
Service sector business activity growth continued to accelerate in May.
At 55.7, up from 54.6 in April, the seasonally adjusted IHS Markit Flash U.S. Services PMI Business Activity Index pointed to the fastest rate of expansion for three months.
May data signalled a slight slowdown in new business growth from the three-year peak recorded in April.
However, the latest rise in new work was faster than seen on average since the survey began in late-2009.
Meanwhile, backlogs of work were accumulated for the thirteenth month running in May, with the latest increase the strongest since March 2015.
Survey respondents noted that rising client demand had resulted in pressures on operating capacity and a corresponding need to hire additional staff.
Service providers signalled a robust and accelerated increase in their average cost burdens in May.
The rate of input price inflation was the steepest for three months, which firms linked to higher oil-related costs and rising commodity prices.
The seasonally adjusted IHS Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) 1 registered 56.6 in May, up fractionally from 56.5 in April, to signal the strongest improvement in business conditions since September 2014.
May data revealed relatively strong rises in both manufacturing production and incoming new business, which survey respondents attributed to improving economic conditions and a continued recovery in domestic sales.
There were signs that manufacturers intend to boost production schedules in the coming months.
Backlogs of work were accumulated at the strongest pace since September 2015 and payroll numbers increased to a greater extent than in the previous month.
Moreover, business optimism regarding the year ahead outlook was the highest since February 2015.
In anticipation of greater workloads, manufacturers signalled a robust increase in input buying during May.
Pre-production inventories also picked up, with the degree of stock accumulation the largest since the start of 2018.
Meanwhile, latest data signalled intense pressure on supply chains, with average lead-times lengthening to the greatest extent since the survey began in May 2007.
Manufacturers widely commented on stretched supplier capacity and logistics delays during the latest survey period.
Robust demand for raw materials and rising commodity prices resulted in another steep increase in input costs across the manufacturing sector.
The overall rate of input price inflation eased slightly since April, but was still among the fastest seen over the past seven years.
Moreover, prices charged by manufacturing companies continued to rise at the strongest rate since June 2011. ■