Business activity continued to contract in March and at a faster rate than expected and by more than in February. At 47.7, the headline flash composite output index was down from February's final 48.1 albeit only a 2-month low.

The overall deterioration reflected weaker performances by both manufacturing and services. The flash sector PMI for the former fell from February's final 47.1 to 45.8 and for the latter from 48.4 to 47.8.

Aggregate demand continued to shrink with further declines in both domestic and overseas demand. Manufacturing output (47.2) also decreased again although by the least in 14 months. Employment was down for the fourth time in the last five months but job losses were confined to manufacturing as services registered a small increase. Reduced backlogs helped to support output. Despite the generally gloomy backdrop, business expectations about the year ahead remained positive and even climbed to their highest level since January 2023.

Input costs increased again for both sectors and inflation rates remained above their long-term trend. Prices charged also increased but by the least in more than three years. In part, this reflected further discounting by manufacturers.

Overall, the March results are disappointingly soft and, irrespective of improving sentiment, suggest first quarter GDP will be weak. Today's report trims the French RPI to 18 and the RPI-P to 5. Economic activity in general is running just marginally ahead of forecasts.

The key composite output is seen at 48.8, up from February's final 48.1.

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.