The German PMI decreased from 42.4 in August to a final 40.6 in September, indicating the most significant decline in the German economic activity in 12 months. However, it was still slightly stronger than the market consensus.

Sluggish demand, market uncertainty, and a struggling automotive sector ensured that key indicators such as output, new orders, and employment all continued to deteriorate. Export sales also experienced a substantial decline, while total new orders fell by the most since October last year. Manufacturers reduced headcount at the quickest rate in over four years and cut purchasing activities as demand continues to fall faster than output. This resulted in the steepest fall in inventories since 2009.

Meantime, weaker input costs, particularly for steel, prompted a reduction in output prices and despite some minor enhancements in supplier delivery times, business confidence plummeted. Indeed, expectations for future output were the lowest since October 2023. Still, today's report puts the German RPI at 2 and the RPI-P at 4, showing overall economic activity performing much as forecast.

No revision is expected to the flash estimate.

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.