May was a marginally better month for manufacturing than originally thought but business activity still continued to contract at an alarming rate. The 42.9 flash PMI was revised up to 43.2, reducing its shortfall versus its final April print to 1.3 points. However, this was still its weakest reading in three years and indicative of industry being mired in recession.

The monthly deterioration in the headline index reflected the steepest decline in new orders since last November, itself due to a broad-based weakening of demand. Output saw its first outright decline in four months and business expectations were pessimistic for the first time so far in 2023. All that said, factory employment continued to expand and at a faster rate than April's 26-month low.

Input costs fell for a fourth successive month and by the most since February 2016. Combined with weak demand, this saw factory gate prices increase only fractionally and by the least since October 2020.

Today's revisions do nothing to alter a dismal picture of German manufacturing which looks set to be a major hindrance to any German economic recovery. Indeed, at minus 28 and minus 15 respectively, both the ECDI and ECDI-P continue to show economic activity in general falling short of market expectations.

No revision is expected to the 42.9 flash print.

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 500 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). The data are released 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 ISM manufacturing index in the U.S. and the Markit 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.