The economy was rather stronger than expected in April. The flash composite output index stood at 53.9, some 1.7 points above the market consensus and 1.7 points stronger than March's final 52.2. The latest reading pointed to the fastest growth in a year.

However, the overall expansion was again solely attributable to services where, at 54.9, the flash sector PMI was well above expectations and two points stronger than its final March print. This was also a one-month peak. By contrast, its manufacturing counterpart slumped to 46.6, down from the previous period's 47.9 and a four-month low. Manufacturing output (48.5) again contracted and at the fastest rate in three months.

Growth of new orders climbed to a 13-month high in services but manufacturers saw a fresh decline. Overall employment nonetheless picked up and the rate of job creation saw a six-month high but, again, only on the back of strength in services. Business confidence about the year ahead was down slightly on March but was still the second highest since March 2022.

Input cost inflation continued to decline and the overall increase in business expenses was the weakest since March 2021 despite higher staff wages in services. Output price inflation accelerated slightly, although the monthly increase in prices was down on the record high seen in April 2022.

The April update further reduces the likelihood of the UK economy sliding into recession this year. Moreover, it suggests that growth is still too strong to accommodate the decline in underlying inflation needed by the BoE if it is to meet its inflation target. As such, today's data increase the chances of another hike in Bank Rate next month. The UK's ECDI now stands at 23 and the ECDI-P at 5. In other words overall economic outperformance is essentially attributable to unexpectedly high inflation.

Services have held in the low-to-mid 50's the past two months and 52.5 is the expectation for April. Manufacturing, which has been in the high 40's, is seen at 48.5.

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.