The S&P Taiwan manufacturing PMI survey indicates that the severe contraction in the sector seen in recent months continued in December but at a somewhat less pronounced pace, with the headline index increasing to 44.6 from 41.6 in November. Respondents report ongoing weakness in both domestic and foreign demand.

Survey respondents reported output, new orders, and new export orders all continued to fall at a sharp pace in December. Payrolls were also reported to have been steady after they were cut for the first time in seven months in November, while the survey's measure of business confidence shows continued pessimism about the outlook. The survey also shows a small increase in input costs, but the biggest reduction in selling prices in more than two years.

The Purchasing Managers' Manufacturing Index (PMI) is based on monthly questionnaire surveys of selected 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 Markit 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.