The economy had a decent May although growth was still down on April's rate. The flash 53.9 flash composite output index was nudged a tick firmer to 54.0 in the final data, now 0.9 points short of its final reading at the start of the quarter but well above the 50-expansion threshold.

The minor headline revision incorporated a marginally stronger service sector where the flash PMI was revised up from 55.1 to 55.2, now a 0.7 point drop versus the previous month. New orders growth was only slightly short of April's 13-month high and this prompted another increase in employment. However, staff shortages ensured that backlogs accumulated for a fourth month in a row. Business sentiment about the year ahead was positive with around half of respondents expecting an increase in activity versus 10 percent anticipating a decline.

Input costs increased sharply and inflation was the highest in three months with rising wages a key factor. This led to another steep increase in output prices although negative base effects still saw the inflation rate hit its lowest level since August 2021.

In line with the rest of Europe, growth of UK business activity remains dependent on services and it is here where the most significant inflation pressures reside. The BoE will be watching wage developments in this sector especially closely. The UK's ECDI now stands at 35 and the ECDI-P at 19. In other words, overall economic activity in general is running ahead of market expectations but mainly due to surprisingly firm prices.

No revisions are expected to the flash data.

The Services Purchasing Managers' Index (PMI) provides an estimate of service sector business activity for the preceding month by using information obtained from a representative sector survey incorporating transport and communication, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. Results 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 data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and 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 ISM non-manufacturing index in the U.S. and the S&P Global PMIs elsewhere, 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.

The S&P Global PMI services data give a detailed look at the services sector, how busy it is and where things are headed. The indexes are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.