The economy looks to have made a respectable and surprisingly solid start to the second quarter. At 54.0, the flash composite output index was well above the 50-expansion threshold and a full point stronger than the market consensus. It was also its best reading in 11 months.

However, in line with much of the rest of Europe, growth remains restricted to services. Here, the flash sector PMI weighed in at a healthy 54.9, up from a final 53.1 in March and similarly an 11-month peak. By contrast, its manufacturing counterpart fell from 50.3 to 48.7, back in contraction territory albeit only a 2-month low. The output sub-index was 49.1.

Despite a drop in manufacturing, aggregate new orders increased for a fifth straight month and by the most since May 2023 courtesy of buoyant demand in services. Overall employment also saw its strongest gain in nine months even though some firms reported a shortage of available workers being a limiting factor. Business expectations for the year were upbeat and more optimistic than at any time in 2023. That said, confidence in manufacturing deteriorated to its lowest level so far this year.

Of note, input cost inflation accelerated sharply, reaching its highest rate in 11 months on the back of building pressures in services. Stronger wage growth was a key factor. However, output price inflation still fell to its lowest mark since February 2021 as competitive market conditions limited the ability of service providers to pass on the increase in costs.

In sum, the April results should leave the majority of BoE MPC members all the more convinced that the current 5.25 percent level of Bank Rate is appropriate and that a near-term cut is not necessary. The UK RPI now stands at 10 and RPI-P at 5. Neither reading is far enough from zero to signal any meaningful deviation in overall economic activity from market forecasts.

Manufacturing unexpectedly jumped nearly 3 points to 50.3 in March for its best showing since July 2022. April's consensus is 50.0. Services growth slowed 7 tenths in March to 53.1 with April expected at 53.3. The composite is expected to rise to 53.0 from March's 52.8.

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.