Private sector business activity began the fourth quarter on much the same soft note as it ended the third. The flash composite output index was 48.6, up just 0.1 point versus its September print but still a couple of ticks short of the market consensus. This was the third straight sub-50 reading.

The minimal headline gain reflected a less weak manufacturing sector where the flash PMI rose from September's final 44.3 to 45.2, a 3-month high. This was driven by a smaller fall in output (45.3 after 44.6). In services the flash index dipped only marginally from September's final 49.3 to 49.2 but this was still a 9-month low.

Aggregate new orders declined for a fourth consecutive month, and by slightly more than in September as both sectors again recorded losses. Backlogs similarly extended their downturn and the weakness of demand saw headcount fall for a second successive month, albeit mainly through the non-replacement of voluntary leavers. Business sentiment about the coming year weakened for the first time since July.

Meantime, inflation news was mixed. Average input cost inflation fell again to its weakest level since the start of 2021 but its factory gate counterpart climbed to a 3-month high due to an acceleration in services.

In sum, the October update provides something for both the BoE MPC's doves and hawks. Expectations are for no change at next week's meeting but inflation pressures in services will almost certainly ensure that some MPC members vote to hike again. Today's report trims the UK's RPI to minus 8 and the RPI-P to minus 28. Overall economic activity is running just slightly behind forecasters' predictions but, ominously, the gap would be wider but for the surprising strength of prices.

Services, at 49.3 in September, sank into sub-50 contraction for the second straight month and is not expected to emerge in October where the consensus is 49.5. Manufacturing, which has been in sub-50 contraction for 14 months in a row, is seen at 44.8 versus 44.3. The composite is expected to edge higher to 48.8 from September's 48.5.

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.