The economy expanded for the fifth consecutive month in June but at the slowest growth rate in three months. The flash composite output index stood at 52.8, some 0.8 points below the market consensus and 1.2 points below May's final 54.0.

The headline fall reflected some slowing in activity rates in both sectors, notably in services, where the flash PMI dropped from May's final 55.2 to 53.7, a 3-month low. Its manufacturing counterpart eased from 47.1 to 46.2, a 6-month trough.

Growth of aggregate new orders was slight in June and the slowest in five months, easing further from April's 13-month peak. Service providers nevertheless reported solid growth in new orders, despite citing the dampening effects of cost-of-living pressures and higher interest costs. In contrast, manufacturers saw a a steep fall in new orders, both domestic and foreign.

In employment, the pace of staff hiring was the fastest since September 2023, reflecting a pronounced rise in service sector recruitment attributed to projected sales growth.

On the inflation front, overall input prices rose at the slowest rate since February 2021. Manufacturing input costs fell at the fastest rate since February 2016, with 26 percent of manufacturers reporting lower purchasing costs in June and only 11 percent reporting an increase. Service providers, however, continued to report higher business expenses largely due to rising staff wages. But output price inflation eased only slightly in June, as a small decline in manufacturing output charges was more than offset by by another sharp rise in prices charged by service providers.

Looking ahead, businesses remained optimistic about their output growth during the next twelve months, though the degree of confidence fell to the lowest level since January.

The weaker-than-expected data of this report pull down the UK's ECDI to 18 and the ECDI-P to 5, still signalling a modest degree of overall economic outperformance versus market expectations.

Services, at 55.2 in May, have held solidly above 50 the last four months with 54.6 the expectation for June. Manufacturing, which has been in sub-50 contraction for ten months in a row, is seen at 46.5 versus 46.9.

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.