Manufacturing activity contracted by slightly less than originally thought in October. The 40.7 flash sector PMI was revised up to 40.8 but remains deep in recession territory albeit 1.2 points above its final September level.

New orders declined for a 19th straight month and was accompanied by another steep drop in backlogs. Similarly, headcount was trimmed for a fourth consecutive month and more aggressively than at any time since December 2020. Against this backdrop, business expectations edged marginally higher but remained pessimistic.

Inflationary developments were generally favourable. Hence, input costs fell again (as they have every month since February) and by more than at quarter-end. Factory gate prices decreased for a fifth month running.

Today's update leaves a grim picture of German manufacturing and offers no hope of any near-term recovery. The sector looks very likely to subtract from fourth quarter GDP growth. That said, at minus 4 the German RPI shows overall economic activity performing much as expected and, indeed, at 12, the RPI-P indicates a modest degree of outperformance by the real economy.

No revision is expected leaving the headline index at 40.7, up from September's final 39.6.

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.