BERLIN (Reuters – Germany’s business activity grew again in May thanks to a sustained recovery in services. However, there is evidence that increasing prices, market uncertainty, and supply issues are already putting pressure on the demand. A preliminary survey was released Tuesday.

S&P Global (NYSE:)’s flash Purchasing Managers’ Index (PMI) for services was 56.3 in May, down from April’s final reading of 57.6 but well above the 50 mark that denotes expansion for the fifth month in a row. Analysts expected that the number would fall to 57.2.

Manufacturing’s flash PMI improved slightly to 54.7, compared with April’s last reading of 54.6. This is higher than the forecasted 54.0 by analysts at Reuters.

Flash composite PMI also saw an increase in activity. This helped beat analysts’ expectations of 54.0. In April, it was 54.3.

Phil Smith, economics associate director at S&P Global, said the survey suggested manufacturers were going through order backlogs to support output after new orders fell at the quickest rate since June 2020, with new export orders particularly hit.

Nearly 800 respondents said that clients were uncertain, there was high demand, and they felt supply disruptions, price rises, uncertainty, and COVID-related lockdowns had all weighed down on goods.

He said that “a post-lockdown recovery is continuing to provide strong tailwinds for the German economic.”

Smith stated that “goods producers are turning increasingly to backlogs for work to support production as new orders show sustained declines, which bodes ill for sector growth prospects if the demand for goods keeps falling.”