The S&P China manufacturing PMI survey shows the sector contracted again in December and at a similar pace, with the survey's headline index falling to to 49.0 from 49.4 in November. Respondents again reported public health conditions had a significant impact on economic activity and sentiment, with Covid-19 cases increasing sharply in recent weeks after authorities relaxed restrictions. Official PMI survey data published over the weekend also showed ongoing contraction in the manufacturing sector in December.

Survey respondents reported output, new orders, and new export orders all fell in December, while payrolls were reported to have been cut for the ninth consecutive month. The survey's measure of business confidence, however, rose to to its highest level in ten months, perhaps indicating that respondents expect public health conditions to improve. Respondents reported margins tightened further in December with the survey's measure of input costs showing a modest increase but selling prices lowered for the eighth month in a row.

The S&P Manufacturing Purchasing Managers' Index (PMI) is based on monthly a questionnaire that surveys of over 500 companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors.

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.

The S&P 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.