Preliminary data released by IHS Markit on Friday revealed that U.S. private sector business activity demonstrated an unprecedented expansion in May.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) came in at 61.5 in May, up from 60.5 in April. The latest reading pointed to a record expansion in factory activity. Economists had expected the reading to decrease to 60.2. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. The increase in the headline figure was supported by quicker expansions in output and new orders, with new orders also growing at the sharpest rate on record. Nonetheless, a further marked deterioration in vendor performance limited operating capacity and reportedly held back output increase. The rate of job creation eased to the slowest for five months. At the same time, input costs rose in May at a pace not seen since July 2008, driven by higher logistics, raw material and fuel costs, with firms commonly reporting soaring vendor prices and difficulties sourcing materials amid a further severe lengthening of supplier delivery times.

The Markit flash services purchasing manager's index (PMI) jumped to 70.1 in May, up from 64.7 in the previous month. Economists had expected the reading to drop to 64.5. The rate of expansion was the fastest since data collection for the series began in October 2009, driven by stronger client demand amid improved customer confidence and the reopening of non-essential businesses. New order growth also accelerated to the quickest on record. Total sales were supported by the sharpest increase in new export business since August 2020. On the cost front, inflationary pressures continued to mount in May, as rates of increase in input prices and output charges quickened to the steepest on record.

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 68.1 in May, up from 63.5 in April, signaling an unprecedented expansion in business activity.

“The US 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 COVID19 restrictions,” said Chris Williamson, Chief Business Economist at HIS Markit. “The May survey also brings further concerns in relation to inflation, however, as the growth surge continued to result in ever-higher prices. Average selling prices for goods and services are both rising at unprecedented rates, which will feed through to higher consumer inflation in coming months,”

 he added.