Following the surprisingly large surge in Services in April, May's preliminary PMIs were expected to fade only modestly from record highs. But, despite US macro data dropping into the red for the first time since June 2020, Services exploded even higher and Manufacturing rose to another new record high.

• US Manufacturing 61.5 (Record high) from 60.5 prior, better than the 60.2 expected

• US Services 70.1 (Record high) from 64.7 prior, better than the 64.3 expected

Source: Bloomberg

Somewhat interestingly, although strong, business confidence slipped to a seven-month low in May.

Adjusted for seasonal factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 68.1 in May, up from 63.5 in April - the strongest in the world.

The rate of expansion was unprecedented after surpassing April’s previous series record.

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit, said:

“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. 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.

“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.

“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.”