U.S. composite PMI reaches 3-month high on solid acceleration in overall business activity

The United States’ composite Purchasing Managers’ Index (PMI) reached to its highest in three months, remaining well above the 50-point no-change mark that demarcates expansion from contraction, largely owing to the solid acceleration in overall business activity. Also, manufacturing production increased markedly, albeit at a slightly softer pace than in April.

The IHS Markit Flash U.S. composite PMI output index rose to 55.7 in May, compared to 54.9 in April, while the country’s services PMI registered 55.7, up from April’s 54.6 and the manufacturing counterpart registered 56.6 in May, up fractionally from 56.5 in April, to signal the strongest improvement in business conditions since September 2014.

A solid rate of employment growth was maintained across the private sector in May, which was linked to long-term business expansion plans and upbeat projections of client demand in the coming months. The index measuring business expectations for the year ahead held close to the 35-month peak seen in April.

Further, service providers signalled a robust and accelerated increase in their average cost burdens in May. The rate of input price inflation was the steepest for three months, which firms linked to higher oil-related costs and rising commodity prices.

In anticipation of greater workloads, manufacturers signalled a robust increase in input buying during May. Pre-production inventories also picked up, with the degree of stock accumulation the largest since the start of 2018.

"Business optimism meanwhile remains at a threeyear high, with companies commonly expecting rising demand to help drive business growth, setting the scene for further strong survey results in coming months," said Chris Williamson, Chief Business Economist at IHS Markit.

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