Germany's manufacturing PMI registered at 48.3, just below April's 48.4 and still under the 50.0 neutral mark for the 35th consecutive month, indicating ongoing contraction. However, beneath this headline, production volumes increased for the third month, buoyed by stronger export demand, particularly from Europe and the US, where pre-tariff stockpiling contributed to growth. Despite this, domestic demand remained subdued, with total new orders dipping slightly.

Encouragingly, employment and purchasing activity declined, suggesting a tentative stabilisation. Input costs dropped significantly again, attributed to weaker demand, lower oil prices, and a stronger euro, allowing firms to reduce output prices competitively. While this price discounting may reflect ongoing pressures to secure new work, it also supports demand recovery. Inventories and supplier delivery times showed signs of easing bottlenecks, albeit modestly.

Most notably, sentiment among manufacturers improved markedly, with expectations for future output reaching their highest level since February 2022. This rebound in confidence signals growing resilience in Germany's industrial base, even as the sector continues to navigate a prolonged period of below-par performance. The latest update takes the RPI to minus 6 and the RPI-P to minus 3, meaning that economic activities are within the consensus of the German economy.

Forecasters look for no revision in the final report from the flash at 48.8.

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.