(Bloomberg) -- US business activity accelerated in early May at the fastest pace in two years, largely reflecting stronger growth at service providers and accompanied by a pickup in inflation.

The S&P Global flash May composite purchasing managers index advanced by more than 3 points to 54.4, the highest since April 2022. Figures higher than 50 indicate expansion. The gauge topped all estimates in a Bloomberg survey of economists.

The advance signals a notable acceleration in overall activity midway through the second quarter. Recent data showing subdued April retail sales and a drop in factory output represented an uninspiring start to the quarter.

Growth in activity at service providers this month was the fastest in a year and manufacturing output expanded at a quicker pace according to S&P Global. Such resilient demand is making it difficult for inflation to cool, helping explain why the Federal Reserve is intent on keeping interest rates higher for longer.

The S&P Global composite measure of input prices rose to the second-highest level since September, while the group’s gauge of prices charged also increased.

“What’s interesting is that the main inflationary impetus is now coming from manufacturing rather than services, meaning rates of inflation for costs and selling prices are now somewhat elevated by pre-pandemic standards in both sectors to suggest that the final mile down to the Fed’s 2% target still seems elusive,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.

Read more: Fed’s Inflation Debate Shifts to How Much Goods Prices Can Drop

Factory input prices advanced at the fastest rate since November 2022, the report showed. Prices-paid and received metrics for service providers also picked up.

--With assistance from Kristy Scheuble.

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