WASHINGTON, May 23 Reuters U.S. business activity accelerated to the highest level in just over two years in May, but manufacturers reported a surge in prices for a range of inputs, suggesting that goods inflation could pick up in the months ahead.

SP Global said on Thursday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, jumped to 54.4 this month. That was the highest level since April 2022 and followed a final reading of 51.3 in April.

A reading above 50 indicates expansion in the private sector. Economists polled by Reuters had forecast the index little changed at 51.1. The increase was driven by the services sector, with the flash PMI rising to 54.8 from 51.3 in April. The manufacturing flash PMI inched up to 50.9 from 50.0.

At face value, the jump in activity suggested that economic growth picked up halfway through the second quarter.

Gross domestic product increased at a 1.6 annualized pace in the JanuaryMarch quarter, largely held back by a surge in imports to meet strong domestic demand.

Socalled hard data for April, including retail sales, housing starts and permits as well as industrial production have suggested that the economy lost further momentum early in the second quarter. The labor market is also slowing.

Business confidence has lifted higher to signal brighter prospects for the year ahead, said Chris Williamson, chief business economist at SP Global Market Intelligence. However, companies remain…