Overall private sector business activity was again surprisingly firm in April. At 53.9, the flash composite output index was a full point stronger than the market consensus and 1.3 points above March's final 52.6. The latest reading was also a 12-month high.

However, once again the headline monthly improvement masked an even steeper contraction in manufacturing where the flash sector PMI fell from March's final 44.7 to just 44.0, a 35-month low. By contrast, its services counterpart rose from 53.7 to 55.7, a 1-year peak.

Manufacturing output (50.3) just about kept its head above water but an increase in aggregate orders masked a fresh contraction in the goods producing sector leaving output to be supported by another decline in backlogs. Even so, job creation was positive and somewhat faster than in March despite the rate in manufacturing easing to its slowest mark in 26 months. Business sentiment deteriorated slightly as optimism slipped in services and held flat in manufacturing, the latter remaining below its long-run average.

Meantime, input costs continued to ease in manufacturing but also rose again in services. In the aggregate, cost inflation was the lowest since December 2019. Output price inflation decelerated again in both sectors but remained historically high.

In sum, the mixed April findings suggest a decent month for economic growth at the start of the current quarter. However, manufacturing weakness remains a major threat and mounting cost pressures will weigh on services. Today's update puts the German ECDI at 13 and the ECDI-P at 28, both measures indicating a limited degree of outperformance by economic activity in general.

At 44.7 in March, manufacturing saw another month of significant contraction and little relief, at a consensus 45.5, is expected for April. Services, after March's 53.7, is seen in April at 53.4.

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.