Private sector business activity was somewhat stronger than expected in April. The flash composite output index weighed in at 54.4, some 0.4 points stronger than the market consensus and up from 53.7 in the final March data. The latest reading signalled the fastest growth in 11 months.

However, as seen in both France and Germany, economic expansion in April was wholly attributable to services where the flash sector PMI chalked up 56.6, more than two points above expectations and 1.6 points stronger than in March. This constituted a 1-year peak. By contrast, the contraction in manufacturing deepened with the flash sector PMI declining from March's final 47.3 to 45.5, a 35-month trough.

Growth of aggregate new orders accelerated at its fastest rate since May 2022 but within this manufacturing posted its worst performance in four months. Indeed, manufacturing output also recorded its steepest decline since last December. Even so, production would have fallen more steeply but for a further rundown in backlogs. Employment continued to expand and the increase here was the sharpest in 11 months but expectations for the year ahead were down slightly in both manufacturing and services.

Input costs fell for a second straight month in manufacturing and by the most since May 2020, whereas costs in services continued to rise sharply. However, in the aggregate, cost inflation declined to its lowest level since February 2021. Output price inflation remained well above its historic norm but also moderated significantly to touch a two-year trough.

The provisional April data suggest that the region's economic growth picked up some momentum at the start of the current quarter. However, the divergent trends between the goods producing and service sectors raises a question mark over the medium term outlook and makes the task of the ECB all the more complicated. Today's update puts the Eurozone's ECDI at 18 and the ECDI-P at 30. Both readings indicate that overall economic activity is running somewhat hotter than market expectations.

After March's 47.3 for manufacturing that was in steep imbalance against 55.0 for services, the consensus estimates for April are 48.0 for manufacturing and 54.5 for services. The key composite output is expected at 54.0, up from March's final 53.7.

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. 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, produced by S&P Global uses a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

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.