Overall private sector business activity lost momentum in June. At 50.8, the flash composite output index was 2.8 points below the market consensus and 3.1 points weaker than May's final 53.9. The latest reading was also a 4-month low.

This time the headline decline was broad-based, with the goods producing and service sectors both registering significant slowing albeit from different levels. For the former, the flash sector PMI slumped further into contraction from May's final 43.2 to 41.0, a 37-month low. The services counterpart fell from 57.2 to 54.1, a 3-month low though still well in expansion territory. Manufacturing output (44.2 after 47.4) hit an 8-month low.

Aggregate new orders shrank for the second month in a row and at the fastest pace since December, reflecting mostly weakness in new orders at manufacturers but also slower growth in service sector new orders. Backlog of work fell at a faster rate in June, reflecting a deepening backlog decline at manufacturers and the first marginal decline in service sector backlogs.

Overall employment growth remained positive though slowing to a 3-month low, but it was unevenly distributed, with factory workforce growth coming close to stalling while the service sector continued to increase staffing at an accelerated pace.

Business sentiment deteriorated to the lowest level of 2023, as pessimism grew in manufacturing, and sentiment amongst service firms, while still positive, was the weakest in six months.

Meantime, inflation eased, as overall input costs rose at the slowest rate in 31 months and overall output prices rose at the slowest rate in 28 months.

Today's update puts the German ECDI at minus 33 and the ECDI-P at minus 37. Both readings indicate that overall economic activity is running well short of market expectations.

Manufacturing has contracted for 11 months in a row and, at 43.2, very deeply so in May with no significant improvement expected for June where the consensus is 43.5. Services in contrast, which have been over 50 for the past five months and firmed more than a point in May to 57.2, is seen at 56.6.

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.