UK business activity slowed in September and while growth remained positive, it still fell short of expectations. At 52.9, the flash composite output index was far enough above the 50-expansion threshold to indicate another respectable month, but it was also 0.4 points weaker than the market consensus. Still, the headline index has been above 50 every month since November last year.

September's slippage reflected weaker gains in both manufacturing, where the sector PMI provisionally weighed in at 51.5, down from August's 52.5 and a 3-month low, and services where the measure dropped from 53.7 to 52.8, only a 2-month trough.

Within manufacturing, the output sub-index (53.5 after 54.4) also lost some ground but remained well above 50 and most of its European counterparts. Indeed, aggregate new orders posted another solid gain despite subdued overseas demand. Even so, backlogs declined for a seventeenth successive month and employment growth was the shallowest since June. That said business confidence remained upbeat and was a little higher than in August.

Meantime, input costs climbed sharply on the back of higher wages and in manufacturing inflation saw its strongest mark since January 2023. However, output prices posted their smallest increase since February 2021, mainly due to a much smaller rise in services.

In sum, the September results provide no clear signal about the timing of the next cut in Bank Rate. By and large, the economy is holding up quite well and sizeable input cost pressures are troubling some firms. However, inflation in the key services sector looks to be easing. Today's update reduces the UK RPI to minus 5 and the RPI-P to minus 11, meaning that overall economic activity is falling just slightly short of market forecasts.

Manufacturing, up 4 tenths to 52.5 in August, has held over the 50 line the last four reports with September seen at 52.5 again. Services, climbing 1.2 points in August to 53.7, has held over 50 the last 10 reports, with September's consensus at 53.5. The composite is expected to fall to 53.3 from 53.8.

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.