The decline in German manufacturing activity at year-end was slightly less marked than originally thought but still deep. The 43.1 flash sector PMI was revised up 0.2 points to 43.3, now 0.7 points above its final November mark and an 8-month high but well short of the 50-expansion threshold.

New orders fell sharply again although by the least since April and backlogs were depleted once more to support output. Even so, at 43.8, the production sub-index remained very weak and even below November's 44.2. Accordingly, employment was trimmed further and fell the most since October 2020. However, business expectations about the year ahead posted a third successive improvement and even turned positive for the first time since last April.

Input costs declined for an eleventh straight month, in turn paving the way for a seventh successive drop in factory gate prices.

In sum, the final December data do nothing to alter a dismal picture of German manufacturing at year-end. Falling output and demand set the tone for what is likely to be another grim first quarter. Today's update leaves both the German RPI and RPI-P at minus 24, showing overall economic activity still falling quite well short of market expectations.

No revision is expected to the flash data leaving the sector PMI at 43.1, up from November's final 42.6.

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.