Germany's composite PMI rose to 52.4, its highest in 16 months and 2.3 points above the consensus, signalling growth momentum. This was primarily driven by the services sector, which bounced back strongly to 52.5 after slipping in August. Manufacturing, however, slipped further into contraction at 48.5, pointing to fragility in industrial activity. While output rose, new orders fell across both sectors, with manufacturers reporting their sharpest decline in demand since January and a second month of falling export sales. Businesses continued to rely on backlogs, which have been steadily depleting for more than a year.

Labour market conditions deteriorated further, with employment shrinking for a sixteenth consecutive month, especially in manufacturing. Rising cost pressures complicated the picture, as input and output inflation both accelerated to multi-month highs, led by services. Although business expectations remained in positive territory, confidence slipped below the long-run average, reflecting concerns about sluggish growth, persistent uncertainty and elevated costs.

Indeed, the data suggests that while Germany has regained some growth momentum, it remains underpinned by weak demand, declining employment and fragile confidence, leaving its recovery vulnerable to renewed headwinds. This latest update takes the RPI to 3 and the RPI-P to 14. This means that economic activities are now within the expectations of the German economy.

The consensus looks for the PMI composite at 50.1 for September versus 50.5 in the August final. PMI manufacturing expected at 50.0 for September versus 49.8 in the August final. Services index seen at 49.5 in September versus 49.3 in in the August 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.