The S&P flash PMI for Germany 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 to a three-month low of 43.4 from 45.4 in May. The business activity index for the services sector shows weaker expansion, falling to a two-month low of 53.5 from 54.2 in May. Reflecting these declines, the flash composite index fell from 52.4 in May to 50.6 in June, also a two-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 stronger demand in the services sector but a bigger fall in factory new orders, while respondents reported weaker payrolls growth in the services sector and a smaller decline in payrolls in the manufacturing sector. The surveys' measures of business confidence showed manufacturing respondents continue to expect a rebound in output over the next 12 months, but weaker sentiment among service sector respondents. Input costs were reported to have risen at a slower pace in the services sector and fallen at a less pronounced pace in the manufacturing sector, while output prices rose at a faster pace in the services sector and fell at less pronounced pace in the manufacturing sector.

Today's data were weaker the consensus forecasts for 52.7 in the composite index, 46.4 in the manufacturing index and 54.4 in the services index. The German RPI fell from minus 7 to minus 21, while the RPI-P fell from minus 12 to minus 32, indicating that German data are now coming in well below consensus expectations.

Manufacturing in May, which remained deeply depressed at 45.4, is expected to add a point to a less depressed 46.4 in June. Services, which in May firmed further to 54.2, are seen at 54.4. Consensus for June's composite is 52.7 following May's 52.4.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. The flash data are released around ten days ahead of the final report and are typically based upon around 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 data are produced 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 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.