Economic activity was again weak in November but was still slightly stronger than expected. The headline composite output index rose from October's final 45.9 to 47.1, some 0.6 points above the market consensus and a 4-month high. However, it remained well below the 50-expansion threshold signalling a fifth successive month of contraction.

The headline gain reflected better performances by both services and manufacturing. In the former, the flash sector PMI climbed from the previous month's final 48.2 to 48.7 and in the latter from 40.8 to 42.3, a 6-month peak.

Within manufacturing, output (44.0 after 41.2) similarly saw its best level in half a year although it was still deep in recession territory. More generally, overall orders fell sharply again, albeit by the least since June, and backlogs were also run down further. However, aggregate employment was only modestly lower and that masked no change in services while business expectations improved to their highest mark in five months.

Inflation developments were a little firmer with small increases in the rates for both input costs and output prices despite continued weakness in manufacturing.

The November report is consistent with the German economy sliding into recession by year-end but at least offers some hope any downswing will be relatively mild. Indeed, at 14 and 19 respectively, the German RPI and RPI-P show economic activity in general running slightly ahead of market expectations.

Manufacturing has been in long and deep contraction, at 40.8 in October. No significant improvement is expected for November where the consensus is 41.0. Services, at 48.2 in October, is seen at 48.3. Consensus for November's composite is 46.5 following October's 45.9.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. The flash data are released around ten days ahead of the final report and are typically based upon around 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 data are produced 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 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.