Markit’s flash Services PMI report points to solid and sustained growth in the all important U.S. services sector.
At 58.6 in May, up from 55.6 in the previous month, the seasonally adjusted Markit Flash U.S. Composite PMI Output Index signalled the fastest rate of private sector output growth since April 2010. The index is based on original survey data from the Markit U.S. Services PMI and the Markit U.S. Manufacturing PMI.
Services output growth accelerates to 26-month high in May
Adjusted for seasonal influences, the Markit Flash U.S. Services PMI™ Business Activity Index picked up to 58.4 in May, from 55.0 in April. The headline ‘flash’ PMI figure, which is based on approximately 85% of usual monthly replies, was well above the neutral 50.0 value, thereby indicating a robust expansion of service sector business activity. Moreover, the rate of growth was the fastest since March 2012.
Higher levels of business activity were supported by the fastest rise in new work for over three years. This in turn contributed to a renewed accumulation of outstanding business, as well as higher employment numbers across the service sector in May.
Service sector business activity has now increased in each of the past seven months. Reports from survey respondents cited improving underlying business conditions and stronger client demand in May. Volumes of new work rose at the steepest pace since February 2011, signalling a marked rebound in new business momentum from the 18-month low registered in March.
May data suggested that the sharp acceleration in new business growth placed some pressures on operating capacity at service providers, as highlighted by outstanding business rising at the most marked pace since last November.
Greater workloads contributed to an acceleration in the rate of service sector job hiring from the 13-month low recorded in April. The latest expansion of payroll numbers was the fastest since January. Some companies also attributed employment growth to an improvement in the business outlook at their units.
May’s survey pointed to the strongest outlook for US service sector business activity since January. Almost two-thirds (63%) of the survey panel anticipate an increased in business activity over the next 12 months.
Meanwhile, input price inflation picked up for the second month running and was the fastest since January. Higher cost burdens in turn led to another robust increase in prices charged by service providers during May. That said, the rate of output charge inflation eased since April.