Private sector business activity was very sluggish at the start of the current quarter. The flash composite output index weighed in at 50.1, just 0.1 point above the expansion threshold and nearly a full point below June's final 50.9. It was also well short of the market consensus and a 5-month low.

The headline deterioration reflected a slowdown in services, where the flash sector PMI fell from June's final 52.8 to 51.9, a 4-month trough, and a slightly more marked contraction in manufacturing, where the PMI eased from 45.l to 45.6, a 7-month low.

Weakness in manufacturing saw aggregate new orders decline for a second straight month and at a faster pace than previously. With backlogs also down again, employment was only unchanged, ending a 6-month sequence of job creation. Against this backdrop, business expectations worsened, hitting their lowest mark in half a year and dipping just beneath their long-run average.

Inflation news was mixed. Input costs rose sharply again and the yearly rate climbed to a 3-month high. By contrast, output prices increased by less than in June although the inflation rate still accelerated modestly.

The preliminary results suggest Eurozone growth all but dried up in July. In particular, demand remains weak and while firms are still optimistic about the coming year, the near-term outlook would seem very modest at best. Moreover, while inflation is probably still moving in the right direction, another cut in ECB interest rates in September is far from guaranteed. Today's data reduce the region's RPI to 1 and the RPI-P to minus 10. Economic activity in general is performing broadly in line with market expectations.

The composite is expected to edge higher in July to 51.0 versus 50.9 in June and 52.2 in May. Manufacturing in July is expected to rise slightly to 46.1 versus June's 45.8 that was down from May's 47.3, with services expected to inch ahead to 53.0 from June's 52.8.

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.