U.S. economic activity surged in May, a key reading indicated Friday, while factory output hit a record high as businesses and factories roared back to life amid state reopenings and vaccine rollouts.
The IHS Markit Composite PMI index, a proxy for U.S. GDP, was pegged at 68.1, nearly 5 points higher than the previous tally in April and well ahead of the 50 point mark that generally separates growth from contraction. Manufacturing activity was measured at 61.5, the highest since IHS began compiling its data series in 2007, while the services sector reading also hit an all-time high of 70.1 points.
"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 IHS's chief business economist Chris Williamson. "The service sector saw an especially impressive surge in growth, beating all prior records by a wide margin, accompanied by another solid expansion of manufacturing output."
“Growth would have been even stronger had it not been for businesses often being constrained by supply shortages and difficulties filling vacancies," he added. “With businesses optimistic about the outlook, backlogs of orders rising sharply and demand continuing to pick up both at home and in export markets, the scene is set for strong economic growth to persist through the summer."
U.S. stocks moved higher following the data release, with the Dow Jones Industrial Average gaining 300 points on the session, while the S&P 500 was marked 28.8 points higher and the Nasdaq gained 71 points.
Benchmark 10-year note yields, meanwhile, held at 1.627%, however, even as the data indicated mounting inflation pressures as the rate of increases in input prices and output charges "quickened to the steepest on record."
“The May survey also brings further concerns in relation to inflation, however, as the growth surge continued to result in ever-higher prices," Williamson said. "Average selling prices for goods and services are both rising at unprecedented rates, which will feed through to higher consumer inflation in coming months.”