UK private sector output contracted in April 2025, marking the sharpest downturn in over two years as global trade tensions and domestic uncertainty disrupted momentum. The PMI composite index dropped to 48.2its lowest since November 2022reflecting falling activity across services (48.9) and manufacturing (44.0), with the latter hitting hardest.

Export-driven industries bore the brunt of this reversal. New work from abroad has declined fastest since May 2020, primarily due to US tariffs that triggered client hesitation and weakened confidence across key international markets. Manufacturers reported their worst export performance outside the pandemic since February 2009.

This challenging backdrop weighed heavily on sentiment. Business optimism fell to its lowest since October 2022, as firms cited fears of recession, geopolitical instability, and sluggish domestic conditions. The slowdown in orders and rising operational costs, including higher national insurance contributions and wage increases, forced many businesses to cut staff or freeze hiring, extending job losses to a seventh month.

Meanwhile, cost inflation surged, driving the fastest rise in output prices in nearly two years, especially in manufacturing, where factory gate inflation jumped. This latest information takes the RPI to 1 and the RPI-P to 22, meaning that economic activities are ahead of schedule within the UK economy.

The consensus sees the composite at 50.5 in the April flash versus 51.5 in the March final. Manufacturing is expected at a very contractionary 44.0 versus 44.9, and services at 51.8, down from 52.5.

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, 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.