In July, the eurozone economy recorded its strongest private sector growth in nearly a year, with the composite PMI output index rising to 51.0, 0.2 points above the consensus and its highest level in 11 months. This modest but broad-based expansion was underpinned by a stabilisation in new orders, ending over a year of continuous contraction. Services led the growth, reaching a six-month high, while manufacturing output remained just below the growth threshold at 49.8, despite hitting a 36-month high in headline PMI.

Employment edged up again, driven by robust hiring outside Germany and France. However, job losses in manufacturing persisted, albeit at a slower pace. Encouragingly, the backlog of work showed only a slight decline, suggesting capacity pressures are easing.

Price pressures continued to moderate. Input cost inflation fell to a nine-month low, while output prices rose modestly, matching June's pace. Manufacturing prices stabilised after two months of decline, while service providers eased their rate of price increases.

Although overall confidence dipped slightly from June's peak, sentiment in Germany and other parts of the eurozone improved. This report signals cautious optimism. Underlying demand is firming, but persistent weakness in manufacturing and export orders tempers expectations of a strong rebound. These updates bring the euro area RPI to 24 and the RPI-P to 28, indicating that economic activities continue to outpace market expectations in the bloc.

The consensus looks for the PMI composite at 50.9 for July versus 50.6 in the June final. PMI manufacturing is expected at 49.8 for July versus 49.5 in the June final. Forecasters expect the services index at 50.8 in July versus 50.5 in in the June final.

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.