Private sector business activity was slightly weaker than originally thought in June. At 49.9, the final composite output index was 0.4 points short of its flash estimate and now nearly three points below its final 52.8 reading in May. It was also a six-month low.

The monthly headline deterioration in large part reflected a slowdown in activity rates in services where, at 52.0, the final sector PMI was 0.4 points below its flash print and 3.1 points short of its final mark at mid-quarter. An increase in new orders was only minimal and the smallest in five months on the back of slower growth in both the domestic and overseas markets. Backlogs were flat after four consecutive monthly increases and, while job creation remained strong, it eased to a three-month low. Inflationary pressures were slightly softer but still significant. Input cost inflation declined to a 25-month low and output charges rose at their slowest pace since October 2021. Even so, business sentiment about the year ahead deteriorated to its lowest level so far in 2023.

In terms of national composite output indices, the best performing country was Spain (52.6) which, along with Ireland (51.4) and Germany (50.6), was above the 50-expansion threshold. Italy (49.7) and France (47.2) were both sub-50 and all five member states saw multi-month lows.

The June update is consistent with an essentially stagnating economy at the end of last quarter. Over the period as a whole, real GDP probably expanded, meaning an end to a short-lived and shallow recession but in general, near-term growth prospects remain at best only modest. Indeed, at minus 35 and minus 36 respectively, the region's ECDI and ECDI-P continue to show overall economic activity still falling well short of forecasters' expectations.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of the manufacturing and service sectors of the economy. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global using 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.