German manufacturing had a miserable February. Although the 42.3 flash sector PMI was revised a little stronger, at just 42.5, it was still fully 3 points short of its final January post and deep in recession territory.

The monthly headline decline reflected steeper falls in output and orders, the former declining by the most since last October on the back of weakness in both domestic and overseas demand. Backlogs saw their sharpest drop in three months and employment was trimmed by the most since August 2020. Against this backdrop, business expectations for the year ahead deteriorated again.

Disruptions to shipping in the Red Sea provided a boost to transport costs but weak demand still saw input cost inflation hold below zero for a 13th successive month. Moreover, the slide in factory gate prices accelerated and was the steepest since last October.

German manufacturing is in a dire state and the ongoing decline in demand argues against any near-term recovery. Despite today's positive headline revision, the sector looks set to provide another hit to GDP growth which may well be enough to ensure that Germany falls into recession this quarter. The German RPI now stands at minus 13 and the RPI-P at minus 7, both measures showing a modest degree of overall economic underperformance.

No revision is expected, leaving the headline index at a lowly 42.3, down from January's final 45.5.

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.