S&P flash PMI for the Eurozone suggests conditions have deteriorated across sectors in June. Headline indicators for both the manufacturing sector and the services sector have weakened and fell well short of consensus forecasts.

The headline index for the manufacturing sector suggests sharper contraction in June, falling sharply to a six-month low of 45.6 from 47.3 in May. The business activity index for the services sector shows weaker expansion, falling to a three-month low of 52.6 from 53.2 in May. Reflecting these declines, the flash composite index fell from 52.2 in May to 50.8 in June, also a three-month low and indicating only modest expansion in the aggregate economy.

Survey respondents reported a bigger fall in manufacturing output and weaker growth in service sector activity in June. The surveys show a small increase in new orders in the services sector but a bigger fall in factory new orders, while respondents reported solid payrolls growth in the services sector and another decline in payrolls in the manufacturing sector. The surveys' measures of business confidence showed weaker sentiment in both sectors. Input costs were reported to have risen at a slower pace in the services sector but to have risen in the manufacturing sector after a previous decline, while output prices rose at a slower pace in the services sector and fell at less pronounced pace in the manufacturing sector.

Today's data were weaker the consensus forecasts for 52.4 in the composite index, 48.0 in the manufacturing index and 53.7 in the services index. The Eurozone RPI fell from minus 31 to minus 41, while the RPI-P fell from minus 33 to minus 48, indicating that Eurozone data are now coming in further below consensus expectations.

The composite is expected to edge higher to 52.4 in June versus 52.2 in May and 51.7 in April. Manufacturing in June is expected to rise to 48.0 versus May's improved reading at 47.3 with services also expected to increase to 53.7 from May's steady 53.2.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of the manufacturing and service sectors of the economy. The flash data are released around ten days ahead of the final report and are typically based upon around 75-85 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 survey, produced by S&P Global uses a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

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.