Private sector business activity had a very poor end to the quarter. September's flash composite output index weighed in at just 43.5, down from August's final 46.0 and well short of the market consensus. It was also indicative of the sharpest contraction in nearly three years.

Weakness was broad-based. The flash manufacturing PMI stood at 43.6, down from August's final 46.0 and a 40-month low. Its service sector counterpart was little better, sliding from 46.0 to 43.9, a 34-month trough. Manufacturing output (43.6 after 46.0) fell at the steepest rate in some 40 months. Overall new orders posted their largest fall since November 2020 and output would have declined more rapidly but for another sizeable drop in backlogs. Even so, firms in general remain reluctant to shed staff and, thanks to a pick-up in hiring in services, total employment growth was positive and broadly in line with its long-run average. By contrast, business confidence worsened and was the poorest since May 2020.

Inflation pressures were mixed. Input costs rose quite sharply and the inflation rate climbed to its highest level since May. However, output price inflation edged a little lower to hit its weakest mark in two-and-a-half years.

The flash September data provide further reason for supposing that third quarter GDP growth will be well short of the 0.5 percent posted in the previous period. Indeed, private sector output should see an outright decline. However, the PMI surveys have been overly negative of late so the slowdown may be rather less marked than suggested by today's report. The French RPI now stands at minus 10 and the RPI-P at minus 15. Both measures show overall economic activity falling slightly behind market expectations.

Minimal change is expected in the flash data, the composite output index seen rising just a tick to 46.1 and both the sectors PMIs holding flat at 46.0.

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.