The final report for June confirmed another miserable month for German manufacturing. The flash sector PMI was revised just 0.1 point firmer to 43.5, still short of May's final 45.4 and indicative of ongoing recession. However, it was only a 2-month low.

The headline deterioration reflected faster rates of decline in both new orders and output the sub-index for the latter falling sharply from 48.9 to 45.1. Backlogs were similarly trimmed further and helped to extend the recent unbroken downturn in headcount to 12 months. Even so, in line with recent months, business expectations about the year ahead improved further, moving above their pre-Covid average and hitting their best level since February 2022.

Inflation signals moved lower again. The slide in input costs lengthened to a record-equalling 17 months and factory gate prices also saw another significant reduction.

The final June results warn that earlier signs that German manufacturing might be on the turn could prove overly optimistic. Weak demand clearly remains a major issue (note an orders update is due Thursday) and without a more solid recovery here, prospects for output must remain poor. Today's update puts the German RPI at minus 32 and the RPI-P at minus 39, both readings indicating that overall economic activity is still running well short of market forecasts.

No revision is expected to the flash data.

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.