Germany's manufacturing sector showed encouraging signs of recovery in June 2025, with the manufacturing PMI rising to 49.0, its highest level in 34 months, driven by a surge in new orders and modest production growth. New order volumes recorded their sharpest increase since March 2022, fuelled by rising domestic and export demand. Output growth also continued for a fourth consecutive month, reaching a two-month high, suggesting that manufacturers are cautiously scaling up operations.

However, the overall PMI remained below the 50.0 threshold, indicating that the sector is still in contraction. Employment continued to decline, with job cuts accelerating at the fastest rate since February, highlighting lingering cost pressures and subdued confidence in long-term staffing needs. Despite an uptick in purchasing activity, inventory levels fell, and backlogs continued to shrink, pointing to underutilised capacity.

Price dynamics revealed ongoing competitive pressure, as both input and output prices declined. Input costs have now fallen for over two years, with producers passing on savings to customers. Nevertheless, sentiment improved, with business expectations reaching their highest since early 2022, buoyed by hopes of increased public investment and a broader economic revival.

The data suggest a sector in cautious transition from stabilisation toward potential expansion. This latest update takes the RPI to minus 15 and the RPI-P to minus 6, meaning that economic activities are now slightly behind the expectations of the German economy.

Forecasters look for no revision in the final report from the flash at 49.0.

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.