German manufacturing remained in the doldrums at the start of the year although business activity fell by the least in 11 months. At 45.5, the final PMI was a tick stronger than its flash estimate and now 2.2 points above its final reading at the end of last year.

Output (45.7 after 43.8) fell again but by less than in any other month since the middle of last year and the declines in both new orders and purchasing activity was similarly shallower than in December. Backlogs also decreased once more, and employment was down for a seventh straight month. Average delivery times, which had been improving rapidly, only stabilised as the effect of weak demand for inputs was essentially offset by disruptions to shipping traffic in the Red Sea. Business confidence eased versus December and so remained well below its historic average.

Meantime, higher transport charges were more than offset by declines in input prices elsewhere leading to the lowest inflation rate in nine months. Factory gate prices decreased modestly, and the rate of decline was the second slowest since prices began falling last June.

There are tentative signs that the worst may be over for German manufacturing but there is little in today's report to boost expectations for a near-term bounce. The sector is very likely to be a drag on first quarter GDP growth. Indeed, risks to economic activity in general remain on the downside with the German RPI at minus 36 and the RPI-P at minus 25.

No revisions are expected to the flash data leaving the sector PMI at 45.4, up from December's final 43.3.

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.