Manufacturing activity was even worse than originally thought and continued to contract at an alarming rate in June. The 41.0 flash PMI was revised down to 40.6, increasing its shortfall versus its final May print to 2.6 points. This is 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 and output in eight months. For the second month in a row, manufacturers are increasingly pessimistic about the about the year ahead, citing sticky inflation, tightening credit conditions, customer uncertainty and geopolitical tensions. Factory employment growth slowed to the weakest in the sequence of job creation going back to March 2021. Purchasing activity saw deep cuts in June, due to lower production requirements and efforts to optimize stocks.

Input costs fell for a fifth consecutive month and by the most since July 2009. Competitive pressures led manufacturers to pass on cost savings through discounts, and factory gate prices fell for the first time in nearly three years.

Today's data paint a dismal picture of German manufacturing which looks set to be a major hindrance to any German economic recovery. At minus 34 and minus 48 respectively, both the ECDI and ECDI-P continue to show German economic activity in general falling well short of market expectations.

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.