Private sector business activity continued to expand this month. The flash composite output index weighed in at 54.0, up from January's final 51.7 and more than 2 points stronger than the market consensus. The latest reading was also a 10-month high.

However, in line with February, overall growth was restricted to services where the flash sector PMI jumped from February's 53.1 to 55.5, also a 10-month peak. By contrast, despite edging up 47.4 to 47.7, its manufacturing counterpart remained below the 50-expansion threshold and within this, output (46.9) was again especially weak.

Aggregate new orders rose for the first time since June 2022 but the increase here was restricted to services as manufacturers posted another decline. Employment also expanded but, again, mainly due to services, and backlogs increased for a second straight month. However, business confidence declined for a second successive month as an improvement in services was more than offset by a deterioration in manufacturers.

Meantime, easier supply conditions helped alleviate some inflationary pressures and input cost inflation slowed to an 18-month low. Output prices rose sharply but negative base effects left the inflation rate at its weakest mark since August 2022.

Today's update bodes well for first quarter GDP growth and the increase in demand is particularly welcome. However, manufacturing clearly remains a drag. Still, today's update lifts both the French ECDI (11) and ECDI-P (5) back into positive surprise territory, albeit not by much.

Services shot nearly 4 points higher in February to 53.1 while manufacturing, however, slowed sharply to 47.4. March's expectations are 52.5 for services and 48.1 for manufacturing.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. The flash data are released around ten days ahead of the final report and are typically based upon around 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 data are 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' manufacturing indexes, 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.