UK manufacturing had a poor December, although activity was at least a little stronger than originally reported. The 44.7 flash sector PMI was revised up to 45.3, now 1.2 points short of November's final mark but still deep in recession territory. This was its fifth successive month below the 50-expansion mark.

Output, new orders, employment and stocks of purchases all fell at accelerated rates, while vendor delivery times lengthened by the least since January 2020. Manufacturing output contracted for a sixth straight month and at one of the fastest rates in the last 14 years while another fall in new orders reflected weakness in both the domestic and overseas markets. Brexit problems again featured in soft export demand. Jobs were cut for a third consecutive month and by the most since October 2020. Even so, backlogs still declined at the second-quickest pace in over a decade and, not surprisingly, business expectations remained at historically low levels.

More optimistically, December at least saw a further easing in input cost and output price inflation. Despite a thirty-seventh consecutive monthly increase in the former, cost inflation eased to its lowest rate since the start of 2021. At the same time, the latter recorded its weakest post in almost two years. That said. Both measures remained historically high.

In sum, today's update will do nothing to undermine expectations that the UK economy is facing a prolonged recession in 2023. However, with the UK's ECDI (42) and ECDI-P (39) still well above zero, for now economic activity in general continues to hold up better than expected.

No revisions are expected to the flash data.

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.