Private sector business activity was revised a little stronger in the final data for May. At 52.4, the final composite output index was up 0.2 points versus its flash estimate and now 1.8 points higher than its final print in April. The latest outturn was also a 1-year high.

The positive headline revision reflected a slightly better performance by services where the flash sector PMI was revised 0.3 points firmer to 54.2, also a 12-month peak. New business saw a second successive advance including the first, albeit marginal, increase in business from abroad in a year. Backlogs fell slightly having risen for the first time in 11 months in April and the rate of job creation was the strongest since June last year. Optimism about the future was the highest since February 2022 and well above its long-run average.

Inflation developments were mixed. Stronger wage growth ensured another increase in input costs and, while the rate of inflation remained well above its long-run average, it declined for a third successive month to its weakest mark since April 2021. A similar picture was true of output prices where inflation remained elevated by pre-Covid standards but was still the lowest since May 2021.

The final May update paints a moderately respectable picture of the German economy in mid-quarter and bodes well for GDP growth. Still, manufacturing has a long way to go to secure a sustainable recovery and is unlikely to provide any real boost until much later in the year. Today's update lifts the German RPI to minus 9 and the RPI-P to minus 6, both measures essentially indicating overall economic activity moving in line with expectations.

The key composite output index is expected to be unrevised at 52.2, up from April's final 50.6.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global.

The Purchasing Managers Index (PMI) survey has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries (including the European Central Bank) use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.