UK business activity slowed sharply in September, with the composite PMI slipping to 51.0 from August's 12-month high of 53.5, its weakest reading since May. Growth in services (51.9) provided the main support, but momentum softened, while manufacturing fell deeper into contraction at 46.2, its lowest in five months. Weak order books, particularly from abroad, continued to weigh on factories, with the automotive sector hit by production stoppages at Jaguar Land Rover.

Demand conditions were subdued overall. New work rose only marginally, while export sales dropped to their lowest since April, reflecting risk aversion and muted spending in the US and Europe, though some firms reported stronger orders from emerging markets. Businesses relied on existing capacity, leading to the 29th straight month of declining backlogs. Employment continued to shrink, with firms freezing hiring or not replacing staff amid cost pressures.

Inflationary strains persisted, though unevenly. Services faced steep rises in wages, energy, and supplier costs, fuelling higher prices, while manufacturers saw factory gate inflation ease to its softest since December 2024. Looking ahead, optimism dipped to a three-month low, as services confidence waned. In contrast, manufacturers were the most upbeat since February, buoyed by investment hopes and technology-linked projects.

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.