With 'hard' data serially disappointing over-exuberant expectations for the last few months, 'soft' surveys continue to offer 'hope' (albeit mixed) for recovery-hyping equity bulls that the vast gap between the market and economic reality will somehow be filled.  After ISM's surprise tumble last month (and PMI's ongoing rise in flash data), the final data for May was expected to show marginal improvements for both manufacturing surveys.

• Markit US Manufacturing PMI beat expectations, rising from 60.5 for April and from 61.5 flash for May to a final 62.1 for May - a record high.

• ISM Manufacturing beat expectations, rising from 60.7 in April and expectations of 61.0 for May to 61.2.

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Source: Bloomberg

Markit notes that the degree of optimism remained upbeat on average, but dipped to a seven-month low amid concerns regarding future supply flows. And that lack of optimism is clear in the ISM employment data which tumbled...

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Source: Bloomberg

Chris Williamson, Chief Business Economist at IHS Markit said:

“US manufacturers are enjoying a bumper second quarter, with the PMI hitting a new high for the second month running in May. Inflows of new orders are surging at a rate unsurpassed in 14 years of survey history, buoyed by reviving domestic demand and record export sales as economies reopen from COVID-19 restrictions. However, elevated levels of other survey indicators are less welcome: prices charged by manufacturers are also rising at an unprecedented rate, linked to soaring input costs and unparalleled capacity constraints.

“Not only is operating capacity being curbed by record supply chain delays so far in the second quarter, but firms have also been increasingly unable to hire sufficient staff. Hence backlogs of work are building up at an unprecedented rate, as firms struggle to meet demand.

However, there is some darker clouds on the horizon, as Williamson notes:

“These backlogs of orders should support further production growth in the next few months, adding to signs of impressive economic expansion over the summer. But manufacturers’ expectations further ahead have moderated, hinting that the growth rate is peaking, linked to worries about capacity limits being reached, rising prices hitting demand and a peaking of stimulus measures.”

The Fed is cornered - as markets start to face up to the reality of waning free money, Powell and his pals can't ease any more amid "unprecedented" crushing of Americans' living standards by the soaring inflation being seen everywhere.