S&P’s Global Flash US Composite Purchasing Managers Index points to a solid upturn in business activity this month, reaching a 13-month high. The index is now at a reading of 54.5, up from 53.4 in April. Services providers led growth, while growth among manufacturers was more muted.

“The US economic expansion gathered further momentum in May, but an increasing dichotomy is evident,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a press release. “While service-sector companies are enjoying a surge in post-pandemic demand, especially for travel and leisure, manufacturers are struggling with overfilled warehouses and a dearth of new orders as spending is diverted from goods to services.”

Still, despite challenging demand conditions in the manufacturing sector, the report found employment growth remained solid in May.

“The inflation picture is also changing,” Williamson said. “Whereas manufacturing prices spiked higher during the pandemic due to strong demand and deteriorating supply, it is now the service sector’s turn to be hiking prices amid resurgent demand and an inability to cope with order inflows due to a lack of capacity.”

He continued, “Jobs growth has accelerated as service providers companies seek to meet demand, but this tightening labor market amid strong demand will be a concern as a fuel of further inflationary pressures.”