Private sector business activity expanded again in April and by rather more than expected. At 51.4, the flash composite output index was 1.4 points above the expansion threshold and 0.6 points stronger than the market consensus. The latest reading was also up from March's final 50.3 and the highest in 11 months.

However, the promising headline print was wholly attributable to a solid performance by services. Here, the flash sector PMI climbed from March's final 51.5 to 52.9, similarly an 11-month high. At the same time, its manufacturing counterpart slid from 46.1 to 45.6, a 4-month low and indicative of another sharp contraction in activity. The output sub-index was 47.1.

A similar pattern was also true of most of the survey's main measures. Hence, a moderate rise in aggregate new orders would have been much steeper but for another marked decline in manufacturing. Ditto employment. Still, at least business confidence in manufacturing improved to its best level since February 2023, probably in part reflecting a further shortening in vendor delivery times. By contrast, sentiment in services dipped to a 3-month low

Meanwhile, rising expenses in services saw total input costs post the joint-fastest increase in a year. Having hit a 4-month low in March, output price inflation similarly accelerated due to a historically large hike in services provider charges.

Overall, the April results may raise a few eyebrows at the ECB. Taken at face value, today's report suggests that the Eurozone economy is gradually picking up momentum - albeit confined to services - and that faster growth is underpinning potentially inflationary wage gains. A cut in interest rates in June still looks very probable but beyond that the monetary easing path is much less clear. Today's data lift the region's RPI to minus 5 and the RPI-P to minus 2, both readings being close enough to zero to signal overall economic activity performing broadly in line with market expectations.

The composite is expected to rise to 50.8 in April versus 50.3 in March and 49.2 in February. Manufacturing is expected to edge higher to 46.5 versus March's lower-than-expected 46.1 with services also expected to edge higher to 51.8 from March's higher-than-expected 51.5.

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. 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, produced by S&P Global uses a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

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.