By William Schomberg
LONDON (Reuters) -A gauge of British economic growth hit its highest level on record in May as many services firms reopened their doors and factories rode a wave of demand from a recovering global economy, prompting a jump in both hiring and prices.
A preliminary reading of the UK Composite Purchasing Managers' Index (PMI) hit its highest level since it was launched in 1998 at 62.0, matching the forecast in a Reuters poll of economists and up from 60.7 in April.
Retail sales and consumer confidence data earlier on Friday also pointed to a swift recovery taking shape in Britain's economy as hard-hit restaurants, pubs and shops reopened following months of lockdown closures.
"May's flash PMIs suggest a strong revival in the economy continued this month," said Martin Beck, economist at consultancy Oxford Economics.
Hotels, restaurants and other previously closed consumer services saw the strongest jump in demand, the PMIs showed.
Activity picked up across the board, "consistent with GDP rising sharply in the second quarter and for strong momentum to be sustained through the rest of the year," Chris Williamson, chief business economist at IHS Markit, said.
The current quarter is likely to be the peak for growth, he said.
The equivalent euro zone PMI, also released on Friday, rose to a three-year high.
The Bank of England said earlier this month that Britain's economy, the world's fifth-biggest, was on course to grow by 7.25% in 2021, its fastest since World War Two, after a nearly 10% collapse last year.
The PMI showed hiring was close to the strongest on record but companies still reported the largest-ever rise in backlogs of work and there was a severe worsening of supply chain delays.
Prices rose sharply, with cost pressures the strongest for nearly 13 years, which prompted companies to increase their prices by the most since the data began to be collected in November 1999.
BoE Governor Andrew Bailey said this week there had been little sign that higher costs for producers had fed into consumer prices in Britain but the central bank was "watching this extremely carefully".
U.S. inflation last week hit its highest level since 2008 and prompted Federal Reserve officials to say they were in no rush to raise interest rates.
IHS Markit's Williamson said much of the increase in prices facing British firms was linked to shipping surcharges and pandemic-related shortages which could prove temporary.
The services sector PMI rose to 61.8 in May from April's 61.0, its highest reading in more than seven years. The index for the smaller manufacturing sector jumped to a record high of 66.1 from 60.9.