Germany's manufacturing sector showed that the PMI slipped to 49.5 from 49.8, signalling a slight contraction in overall conditions. On the surface, production offered a bright spot, rising for the seventh straight month and at the fastest pace since March 2022, led by robust growth in investment goods. Much of this, however, was driven by backlogs rather than fresh demand.

The forward-looking signals were less encouraging. New orders fell for the first time in four months, hit by global uncertainty, foreign competition, and US tariffs. Export sales stagnated, and firms shed jobs at the fastest pace since June, reflecting efforts to cut costs in a softer demand environment. Purchasing activity also declined, contributing to falling input costs, with many businesses turning to cheaper suppliers and benefitting from a stronger euro.

Interestingly, delivery times lengthened for the first time in nearly three years, linked to Asian shipping delays and supplier bottlenecks, suggesting fragile supply chain resilience. While producer prices continued to fall, the pace of decline slowed. Overall, optimism weakened sharply to a nine-month low, highlighting manufacturers' concerns about geopolitical instability and a sluggish domestic economy overshadowing short-term output gains. This latest update takes the RPI to 14 and the RPI-P to 13, meaning that economic activities are now ahead of market expectations in Germany.

The consensus sees the index unrevised from the flash at 48.5 and down from 49.8 in August.

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.