UK private sector business continued to decline at year-end but at a slower rate than in November. The 49.0 flash composite output index was unrevised and so remains 1.0 point short of the 50-expansion threshold but 0.8 points stronger than November's final print. This was its fifth successive sub-50 post.

Activity in services was just marginally weaker than originally reported with the 50.0 flash sector PMI being trimmed a tick to 49.9. However, this too was well up from November's final 48.8. New orders declined for a fourth straight month but at the slowest pace in three months. Weakness was concentrated in the domestic market as foreign demand edged a little firmer for the first time since August. Labour shortages were still an issue for some firms but overall employment was only flat, ending a sequence of 21 months of growth. To this end, although business sentiment improved further following September's disastrous mini-budget, it remained historically subdued.

Meantime, inflation pressures eased slightly despite further sizeable gains in both input costs and output prices. The inflation rate for the former touched a 15-month low and the increase in the latter was the smallest since the start of 2022.

In sum, the signs are that the UK economy contracted only very modestly in December. This was probably enough to ensure the onset of recession but with both the UK's ECDI (20) and ECDI-P (9) still above zero, the downturn should be no steeper than already anticipated.

No revisions are expected to the flash data.

The Services Purchasing Managers' Index (PMI) provides an estimate of service sector business activity for the preceding month by using information obtained from a representative sector survey incorporating transport and communication, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and S&P Global.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM non-manufacturing index in the U.S. and the S&P Global PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The S&P Global PMI services data give a detailed look at the services sector, how busy it is and where things are headed. The indexes are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.