The economy contracted by less than originally thought last month. The final composite output index stood at 48.6, up from its 47.9 flash estimate, but still below both the 50-expansion threshold and July's final 50.8. This was the weakest reading since January.

Services followed suit with the 48.7 flash sector PMI being boosted to a final 49.5, now close enough to the 50 mark to indicate broad stagnation, but still short of July's final 51.5. New business fell but at only a marginal rate despite a modest increase in export demand. Brexit-related issues continued to be cited as a factor dampening trade with the EU. Subdued demand put a partial check on employment where the latest increase was the smallest since March. Backlogs fell sharply and for a third straight month with the latest being the steepest since June 2020. Business confidence about the year ahead remained positive but the degree of positivity eased fractionally from July and was the lowest in seven months.

Input cost inflation matched its lowest rate in 27 months but remained historically high on the back of rising wages and more expensive fuel. Still, output price inflation eased for a fourth month in a row and was the lowest since August 2021.

In line with much of Europe, the UK August PMI survey points to a significant loss of economic momentum and at least the possibility of a negative handle on third quarter GDP growth. At this stage, the BoE MPC vote in September remains uncertain, meaning that next week's labour market report will be even more important than usual. Today's update lifts the UK's ECDI to minus 21 and the ECDI-P to minus 17, but both measures remain sub-zero and so indicative of economic activity in general still failing to keep up with market expectations.

No revisions are expected to the flash data leaving the composite output index at 47.9 and the services PMI at 48.7.

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.