U.S. Factories, Services Output Extend Records on Robust Demand

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A measure of output at U.S. manufacturers and service providers advanced to a fresh record in May, underscoring solid demand that’s contributing to added inflationary pressures.

The IHS Markit flash composite index of purchasing managers at manufacturers and service providers surged to 68.1, the highest in data back to 2009, from 63.5 a month earlier, the group reported Friday. Readings above 50 indicate growth.

The gain was largely driven by a record expansion in the group’s measure of service business activity. Demand is gathering pace as the recovery from the pandemic propels long-depressed service providers, particularly in leisure and travel.

U.S. Factories, Services Output Extend Records on Robust Demand

Reports elsewhere showed the euro-area recovery also is increasingly being supported by rebounding services as factories confront a supply squeeze. British business confidence hit an all-time high.

Order growth at U.S. manufacturers climbed to a record, though shortages of materials also caused backlogs of work to reach a series high.

In addition a gauge of export orders for manufacturers advanced to a 14-year high. Robust domestic and foreign demand is providing factories and services providers the wherewithal to pass along higher input costs. Measures of prices received by factories and services rose to record highs.

“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,” Chris Williamson, chief business economist at IHS Markit, said in a statement.

“Average selling prices for goods and services are both rising at unprecedented rates, which will feed through to higher consumer inflation in coming months,” Williamson said.

The IHS Markit’s gauges of input prices and new business at service providers also climbed to the highest in data back to 2009.

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