The final data for May confirmed another poor month for German manufacturing. The flash sector PMI was unrevised at 45.4, well above April's final 42.5, but also still a long way below the 50-expansion threshold. That said, at least the last month's reading was a four-month high.

The monthly increase in the headline index reflected smaller declines in both output and new orders. The former sub-index (48.9) even moved within touching distance of the 50 mark in registering a 13-month peak. For orders, the improvement was aided a near-stabilisation in exports on the back of stronger demand out of the U.S. and China. Even so, backlogs again declined and the rate at which headcount was reduced was quicker than the average seen over the last year. Nonetheless, in line with recent months, business expectations about the year ahead improved further.

Inflation signals moved lower. The rate of decline in input costs accelerated for the first time in six months and in a still highly competitive market, factory gate prices were cut for a twelfth successive month.

Taken at face value, the final May results offer hope that the manufacturing sector is on the turn. Nonetheless, while demand may be beginning to stabilise, it is doing little more than that and the immediate outlook for production remains soft. Today's update puts the German RPI at minus 6 and the RPI-P at minus 2, both readings indicating that overall economic activity is performing much as expected.

No revision is expected to the flash data leaving the headline index at 45.4, up from April's final 442.5.

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.