Private sector business activity was much weaker than expected in June. The flash composite output index weighed in at 50.3, some 2.2 points below the market consensus and 2.5 points down from May's final 52.8. The latest reading was a 5-month low and just barely still in expansionary territory.

As seen in both France and Germany, the overall index decline in June was mostly attributable to slower growth in previously robust services, where the flash sector PMI index fell 2.7 points from May's 55.1 to 52.4, a 5-month low. The contraction in manufacturing deepened but the decline was less pronounced, with the flash sector PMI falling 1.2 points from May's final 44.8 to 43.6, a 37-month trough.

Aggregate new orders, which were nearly stagnant in May, worsened further and dropped for the first since January. Manufacturing remained the main source of weakness, as new orders for goods fell to the largest extent since last October. New orders in the service sector rose only modestly in June, in contrast to strong gains in previous months. Overall backlog of orders, meanwhile, fell at the steepest rate in seven months.

Overall employment growth slowed for the second consecutive month and job creation was the lowest since February. In manufacturing, headcount fell for the first time since January 2021, while service sector jobs growth remained strong but waned to the lowest level since March.

Inflation trends again reflected the relative strength of the two sectors. Hence, service sector input costs continued to rise at an above-average rate mostly due to wage pressures, while average factory input prices dropped for the fourth month in a row and at the steepest rate since 2009. Average output prices rose at the slowest rate in 27 month months, as factory gate prices fell for the second month in a row in the largest decline in three years, while average prices for services rose sharply again but at a slower rate than in prior months.

Looking ahead, business expectations for the coming year were down in both sectors and, combined, slid further below the long-run average to the lowest level so far this year.

Today's update puts the Eurozone's ECDI at minus 21 and the ECDI-P at minus 20. Both readings indicate that overall economic activity is running somewhat cooler than market expectations.

After May's 44.8 for manufacturing 55.1 and for services, the consensus estimates for June's readings are 44.9 and 54.8 respectively. Manufacturing has been in contraction for the last eleven months straight with services in expansion for the last five.

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. 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, produced by S&P Global uses a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

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.