Economic momentum held steady this month near February's rate. At 52.9, the flash composite output index was just 0.1 point weaker than February's 9-month high, albeit slightly softer than the market consensus.

Headline growth remains restricted to services where the flash sector PMI weighed in at 53.4, down from a final 53.8 in mid-quarter and a 3-month low but still indicative of a decent month for business activity. However, the gap between it and its manufacturing counterpart narrowed significantly with the latter's flash PMI rising from 47.5 to 49.9, its best reading in some 20 months.

Aggregate new orders increased for a fourth straight month with export sales up for the first time since last May. Manufacturers also noted an increase in demand and their output sub-index (50.2) moved above 50 for the first time in 13 months. Overall backlogs fell again, but only modestly, while employment was flat. Business expectations for the year were mixed with manufacturers posting their best level since April 2023 but service providers recording a decline.

Meantime, input costs rose sharply again and inflation was only just short of February's 6-month peak. Output prices also climbed steeply to hit their strongest mark since July last year. Higher wages were a key factor.

In sum, the March results may be a little softer than expected but they still suggest that the UK economy has enjoyed a decent March and pulled out of recession this quarter. Taken together with some ominous inflation signals, the data further reduce the chances of a near-term cut in Bank Rate. That said, with the UK RPI and RPI-P now at minus 26 and minus 24 respectively, economic activity in general is falling somewhat short of forecasts.

Services growth slowed slightly in February to 53.8 with March expected to slow further to 53.3. Manufacturing improved slightly but remained in the doldrums at 47.5 with March's consensus at 47.8. The composite is expected to rise slightly to 53.3 from February's 53.0.

The flash Composite Purchasing Managers’ Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of 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.