UK private sector business activity was slightly weaker than expected in March. The flash composite output index slipped from February's final 53.1 to 52.2, still above the 50-expansion threshold but 0.5 points below the market consensus. This was only its second print on the right side of the 50-expansion threshold since last July.

The headline fall reflected some slowing in activity rates in both sectors, notably in manufacturing where the flash PMI dropped from February's final 49.3 to 48.0. Its services counterpart eased from 53.5 to 52.8.

Manufacturing output (49.0) slipped back below 50 but, largely courtesy of services, aggregate new orders rose by the most since last April. Overall employment was little changed as a rise in services was offset by another fall in manufacturing. Staff shortages were again cited as an issue. Business sentiment improved marginally and was the highest since March 2022. This reflected a rise in business expectations in the manufacturing sector

Meantime, total input cost inflation dropped to a 2-year low, mostly reflecting a considerable softening in pressures in manufacturing. Costs rose significantly more quickly in services with higher wages a driving force. Even so, output price inflation continued to drift down and the latest rise in prices was the slowest since August 2021.

In sum, today's results point to first quarter GDP growth of around 0.2 percent and with orders picking up, the likelihood of a recession this year has receded further. However, growth is very lopsided and tightness in the services labour market clearly remains a threat to inflation. Today's slightly disappointing report reduces the UK's ECDI to 2 and the ECDI-P to minus 7, both measures close enough to zero to signal overall economic activity moving much as the forecasters predicted.

The composite output index is seen dipping from February's final 53.1 to 52.7 but remaining well above the 50-expansion threshold.

The flash Composite Purchasing Managers’ Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of the manufacturing and service sectors of the economy, around 650 companies in each case. The flash data are released around ten days ahead of the final report and are typically based upon around 75-85 percent of the full survey sample. Results covering a range of variables including manufacturing output, employment, new orders, backlogs and prices 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 report also contains flash estimates of the manufacturing and services PMIs. The survey is produced by 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 purchasing managers' surveys, investors will know what the economic backdrop is for the various markets. The flash PMIs are particularly closely watched as they provide a wide ranging look at economic developments and some of the most up to date information available. 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.