In July 2025, the flash composite PMI stood at 50.3, 0.4 points below the consensus forecast and slightly above the stagnation threshold. While manufacturing rose for a fifth straight month, the pace slowed (49.2), reflecting waning energy in the sector. Services, however, showed signs of revival, with business activity (50.1) climbing to a four-month high and new business rising for the first time since August 2024.

Yet optimism was met with some restraints. Despite improved order inflows and the highest business expectations since May 2024, firms cautiously trimmed staffing, leading to the year's first broad-based employment decline. This suggests businesses remain wary, focusing on cost control amid only modest demand.

Crucially, inflationary pressures continued to cool. Input cost growth decelerated to its lowest since October 2024, and service providers saw the softest output price rise in over four years. Meanwhile, manufacturers have cut prices for a third consecutive month, aided by cheaper raw materials and favourable exchange rate effects.

Overall, July's figures hint at stabilisation rather than a rebound, emphasising the need for sustained demand and stronger job market signals to secure recovery, taking the RPI to 8 and the RPI-P to 7. This means that economic activities are now within the expectations of the German economy.

The consensus looks for the PMI composite at 50.7 for July versus 50.4 in the June final.
PMI manufacturing is seen at 49.5 for July versus 49.0 in the June final. Forecasters expect services at 50.1 in July versus 49.7 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 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.