Private sector business activity essentially stagnated in April. At 49.9, the flash composite output index was just 0.1 point short of the 50-expansion threshold but more than a full point above the market consensus. It was also up from March's final 48.3 and an 11-month high.

However, the improvement was far from well-balanced. Hence, while the flash services PMI climbed from the previous month's final 48.3 to 50.5, signalling the first increase in output since May 2023, its manufacturing counterpart fell from 46.2 to 44.9, a 3-month low and deep in contraction territory.

Aggregate demand continued to shrink with an increase in services more than offset by another decline in manufacturing. Backlogs followed suit and what was one of the largest rises in overall employment since the middle of last year was similarly wholly attributable to services. Business expectations about the year ahead deteriorated in both sectors and in manufacturing turned pessimistic for the first time in three months.

Not helping matters, inflation moved in the wrong direction. Input costs saw their highest rate in five months while output prices posted a 3-month peak.

In sum, the April results are very mixed. For the ECB, the main focus will be the relative buoyancy of services and increased inflationary pressures. A June cut in interest rates remains likely but a rapid ease thereafter now looks less probable. Today's report lifts the French RPI to 7 and the RPI-P to 30. Economic activity in general is running somewhat ahead of forecasts.

The flash composite output index is expected to improve from March's final 48.3 to 48.8, edging closer to the 50-growth threshold.

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.