Eurozone manufacturing activity was unrevised in the updated look at January. At 48.8, the final sector PMI matched its flash estimate and so was still 1 point above its final reading in December and a 5-month high. However, the latest outturn still points to an outright contraction.

In a similar vein, manufacturing output (48.9 after 47.8) also fell at a shallower rate and the sub-index itself hit a 7-month high. Crucially, new orders also continued to decline, although again, less quickly than at year-end, and stocks of finished goods were down for the first time since May last year. Production would have been weaker but for a sizeable and eighth drop in backlogs. Nonetheless, firms remain reluctant to shed staff and employment expanded again with the rate of growth edging up to a 3-month high. In part, this probably reflected a marked improvement in business confidence which rose to its highest level since just before the Russian invasion of Ukraine.

Inflation developments were mixed with the input cost rate sliding to a 26-month low and beneath its historic average but selling prices increasing at a slightly faster pace, although still well short of its 2022 trend.

Regionally in terms of national PMIs, the best performing state was France (50.5) which along with Italy (50.4) and Ireland (50.1) was above the 50-expansion threshold. The Netherlands (49.6) and Greece (49.2) were not far behind but there were wider gaps with Austria and Spain (both 48.4) and, in particular, Germany (47.3).

The details of today's report offer some hope that manufacturing conditions are at least beginning to stabilise even if, for now, positive growth looks someway off. Still, the ongoing decline in new orders remains a major problem. More generally, the January data leave the Eurozone's ECDI (18) and ECDI-P (22) in positive surprise territory, meaning that on current trends overall economic activity is still outperforming market expectations.

No revisions are expected to the flash data.

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 3,000 companies. Results 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). Released by S&P Global, national data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These countries together account for an estimated 89 percent of Eurozone manufacturing activity.

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 ISM manufacturing index in the U.S. and the S&P Global PMIs elsewhere, 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.

The S&P Global PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.