Official Chinese PMI survey data indicate that output across China's economy rose in January after three consecutive months of decline, with the headline index for both the manufacturing and non-manufacturing sector moving back into expansion territory. Authorities have reported a decline in Covid-19 cases in recent weeks but economic activity remains highly vulnerable to public health conditions.

The headline index for the CFLP manufacturing PMI rose from 47.0 in December to 50.1 in January, above the consensus forecast of 49.8 and its highest level since September. The CFLP non-manufacturing PMI showed much bigger improvement in conditions elsewhere in the economy, with its headline index surging from a multi-month low of 41.6 to 54.4, well above the consensus forecast of 51.4 and the highest level since June. The composite index covering the entire economy, the General PMI, rose from 42.6 in December to 52.9 in January.

Today's data are one of the few official releases to report January data separately. Most official economic data for China are not reported separately for January and February but are instead combined and reported together in order to remove distortions caused by changes in the timing of lunar new year holidays each year. This means that most official data for the first two months of the year will not be reported until mid-March.

The CFLP manufacturing PMI is expected to improve to 49.8 in January while the non-manufacturing PMI is expected to surge back into expansionary ground at 51.4. Both indexes fell deeper into contraction in December, especially non-manufacturing at 41.6 and also manufacturing at 47.0.

China Federation of Logistics and Purchasing (CFLP) Manufacturing Purchasing Managers Index (PMI) is the monthly survey of about 800 purchasing managers that is conducted jointly by CFLP and National Bureau of Statistics (NBS). The questions focus on the health of the manufacturing sector. The numeric result is a diffusion index. A reading above 50 indicates that manufacturing is growing. A reading below 50 indicates contraction.

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 CLFP 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. The survey tends to have a greater impact when it is released prior to the HSBC/Markit manufacturing PMI because the two reports are correlated.