The UK manufacturing PMI reached a 6-month high in July. However, at 48.0, the manufacturing PMI was 0.2 points less than the flash estimate and signalled contraction for the tenth consecutive month.

Manufacturers continued to experience falling output, new orders, and employment, with new export demand dropping even further due to lower demand from the US, Europe and China. Exports have declined over the last 3 and a half years, however, the latest decline is exacerbated by concerns over tariffs, rising input costs and client uncertainty. Despite this, business optimism in June reached a 5-month high.

Input cost and selling price inflation largely remain unchanged. Today's update leaves the UK RPI at minus 3 and the RPI-P at minus 15. Overall, the real economy in general is slightly falling short of market expectations.

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 3,000 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 survey covers more than 600 industrial companies and is compiled by the Chartered Institute of Purchasing and Supply (CIPS) and 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 and S&P Global 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 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.