Private sector business activity was surprisingly firm in February. At 51.1, the flash composite output index was 0.7 points stronger than the market consensus and more than a point above January's final 49.9. More importantly, it was also the first reading above the 50-expansion threshold in eight months.

However, the monthly improvement masked another contraction in manufacturing where the flash sector PMI fell from January's final 47.3 to just 46.5, a 3-month low. By contrast, its services counterpart rose from 50.7 to 51.3, an 8-month peak.

Manufacturing output (50.6 after 48.4) at least moved back into positive growth territory as lead times on inputs shortened by the most on record but new orders declined again. Services fared rather better and posted a modest increase in demand. Aggregate employment continued to expand but the increase was the joint-weakest over the past two years and while the highest since the Russian invasion of Ukraine, business optimism was still historically soft.

Meantime, of note, input costs in manufacturing declined for the first time in nearly two-and-a-half years. However, service sector input costs continued to rise sharply and more quickly than in January, driven in large part by higher wages. Measured across the two sectors, input cost inflation eased to a two-year low but was still well above its long-run average. A similar pattern was also seen in total output prices.

In sum, the mixed February findings point to a probable return to positive GDP growth this quarter. However, manufacturing is clearly still struggling and mounting cost pressures in services will not sit well with the ECB. Today's update puts the German ECDI at 12 and the ECDI-P at 15, both measures indicating a limited degree of outperformance by economic activity in general.

Germany's services, at 50.7, emerged from long contraction in January though manufacturing remained decidedly below 50 at 47.3. February's respective expectations are slight improvement for both, to 51.0 and 47.8.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of 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.