France's private sector experienced a setback in June in the face of continuing tariff pressures, heightened global competition, and a more complex situation in the middle east.

The composite index fell to a two-month low in June to 48.5, slipping from 49.3 in May, with the manufacturing sector reporting its first decline in three months to a four-month low. The index fell to 47.8 in June from 49.8 in May, which was just below the level of 50, above which marks expansion.

Manufacturing was plagued by unfavorable demand conditions, inventories piling up at businesses, leading to order postponements. Services also acted on a drag to the composite result, falling to a two-month low of 48.7 in June from 48.9 in May.

Overall demand conditions are weighing on the private sector with new orders drying up, leading companies to work through pending orders. The upshot is that firms are trimming headcount through attrition, allowing temporary worker contracts to lapse and not replacing retiring workers.

Despite the current situation, the business outlook is the best it has been since October on the hopes demand will perk up again. Data in the coming months will show whether the June pullback is merely a blip or a more prolonged slide in the private sector.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. The flash data are released around ten days ahead of the final report and are typically based upon around 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 data are produced 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 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.