The final data confirmed another and accelerated contraction in manufacturing activity last month. At 45.3 the July headline index was 0.3 points firmer than its 45.0 flash estimate but still short of June's final 46.5 and even further below the 50-expansion threshold. Indeed, the latest reading signalled the worst performance by the sector in seven months.

New orders and output declined at steeper rates than in June with weak demand characterising both the domestic and overseas markets. Backlogs were down for a fifteenth month in a row while headcount was trimmed for a tenth straight month. However, businesses remained positive about the outlook with 53 percent of respondents expecting production to be higher in the next 12 months.

Meantime, a sixth successive improvement in vendor performance contributed towards a third successive drop in input costs and the inflation rate here was close to June's 88-month low. However, factory gate prices were little changed as firms looked to support profit margins.

The July update leaves UK manufacturing following the recessionary pattern seen in continental Europe. It also argues against any early recovery. Nonetheless, with output prices proving somewhat sticky, today's report will not stop the BoE tightening again on Thursday. The UK's ECDI now stands at 9 and the ECDI-P at 11, both values showing a limited degree of overall economic outperformance.

No revision is expected to the flash data.

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 3,000 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 survey covers more than 600 industrial companies and is compiled by the Chartered Institute of Purchasing and Supply (CIPS) and 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 and S&P Global 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 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.