Private sector business activity made further ground this month. At 52.3, the flash composite output index was again above the 50-expansion threshold and also 0.3 points stronger than the market consensus. The latest reading was up from April's final 51.7 and a 12-month high.

In line with recent months, the promising headline print was wholly attributable to services where, at 53.3, the flash sector PMI was solid and unchanged from April's final print. However, at 47.4, its manufacturing counterpart at least moved closer to stagnation and output (49.6) posted its best reading in 14 months.

Courtesy of a 13-month peak in services, aggregate new orders continued to expand despite ongoing weakness in manufacturing. Growth here prompted another services-led increase in employment which rose by the most since last June. Even so, purchasing activity declined again and a lack of pressure on supply chains saw delivery times shorten for a fourth straight month. Looking ahead, business expectations climbed to their strongest level since February 2022 on the back of improving optimism in both sectors.

Inflation news was mixed. Input costs rose sharply again but the yearly rate still fell and output price inflation eased to its lowest mark since November 2023.

The preliminary May results suggest that the Eurozone economy is picking up momentum and bode well for second quarter GDP growth. Inflation pressures have not gone away but at least seem to be moving in the right direction. Overall, there is nothing here to stop the ECB cutting key interest rates in June. Today's data lift the region's RPI to 39 and the RPI-P to 53, both readings showing economic activity in general a good deal stronger than expected.

The composite is expected to further rise in May to 52.0 versus 51.7 in April and 50.3 in March. April's result was the best in nearly a year. Manufacturing in May is expected at 46.3 versus April's 45.7 with services expected at 53.5 after April's better-than-expected 53.3.

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.