Investing.com - U.S. private sector activity picked up in May, according to survey data released on Wednesday.
The preliminary reading of the Markit services purchasing managers’ index came in at 55.7 this month, up down from 54.6 in April.
Economists had forecast a reading of 54.9.
The manufacturing PMI rose to 56.6 in May, compared to 56.5 a month earlier.
Analysts had expected a reading of 56.6.
The composite output index, which measures the combined output of both the manufacturing and service sectors, rose to 55.7 this month from 54.9 in April.
The consensus forecast was looking for a slight rise to 55.0.
A reading above 50.0 on the index indicates industry expansion, below indicates contraction.
The research group noted that private sector firms signaled a robust and accelerate rise in business activity “which adds to evidence of a sustained growth rebound in the second quarter of 2018.
However, IHS Markit also warned that input cost inflation rose to nearly a five-year high.
“The flash May PMI surveys point to an encouragingly solid pace of economic growth of 2.5-3% with monthly job gains running at just over 200,000, though the interesting action is coming on the prices front,” IHS Markit chief economist Chris Williamson said in the report.
“Input costs measured across both manufacturing and services are rising at the fastest rate for nearly five years, with the goods-producing sector seeing the steepest cost increases for seven years in recent months,” he explained.
Williamson pointed to the fact that supplier delivery delays - a key leading indicator of inflationary pressure - had risen to the highest point in the 11-year history of the survey. Increased demand was allowing suppliers to charge higher prices, while higher oil and energy prices were also pushing up firms’ costs.
“Business optimism meanwhile remains at a three-year high, with companies commonly expecting rising demand to help drive business growth, setting the scene for further strong survey results in coming months,” Williamson concluded.