UK private sector business continued to decline at the start of the year but at a slower pace than originally thought. The 47.8 flash composite output index was revised up to 48.5, now only 0.5 points short of December's final mark albeit still well below the 50-expansion threshold for a sixth successive month.

Activity in services was also adjusted a little firmer with the 48.0 flash sector PMI being raised to 48.7. However, this was still short of its 49.9 final year-end print and indicative of the worst performance since January 2021. New business contracted for a fifth consecutive month as weakness in the domestic market more than offset an improvement in overseas sales. Labour shortages were again an issue for some firms but the slowest rate of employment growth in the last two years also reflected softer demand. That said, business sentiment continued to improve and was the most positive since April 2022.

Meantime, a tight labour market ensured continued strong wage pressure and another sizeable increase in overall input costs. Even so, the rate of inflation fell to its lowest level since last August. By contrast, output price inflation accelerated slightly versus December.

Today's data still point to a probable contraction in GDP this quarter. Nonetheless, while financial markets are looking for the BoE to cut rates before year-end, inflation trends remain firm enough to warn that Bank Rated might not yet have topped out. The UK's ECDI and the ECDI-P now stand at minus 26 and minus 25 respectively, both measures signalling a moderate degree of underperformance that will be seen by yesterday's MPC dissenters as justifying their vote for no change.

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.