The global manufacturing economy has been in marginal contraction for the last five months, based on J.P. Morgan's PMI which is little changed, at a sub-50 level of 49.1 in January versus a revised 48.7 in December. The signal from new orders, however, hints at a slight deepening in contraction in the reports ahead, at 47.8 in January for a 6 tenths decline.

The report's price readings are also unfavorable, edging slightly higher to indicate more pressure for both input costs, at 57.1, and selling prices at 54.8. Employment in January is nearly deadflat compared to December, at 50.1, while output volumes are in marginal contraction at 49.0.

Based on output, only nine of 31 nations saw expansion in January which was largely confined to Asia with the important exception of China where output contracted.

A solid plus in January is improvement in business confidence which is at a 10-month high though, as the report notes, is still below its long-run average.

J.P. Morgan Global Manufacturing PMI gives an overview of the global manufacturing sector. It is based on monthly surveys of over 10,000 purchasing executives from 32 of the world’s leading economies, including the U.S., Japan, Germany, France and China which together account for an estimated 89 percent of global manufacturing output. It reflects changes in global output, employment, new orders and prices. The Global Manufacturing PMI is seasonally adjusted at the national level to control for varying seasonal patterns in each country and is produced by J.P. Morgan and Markit Economics in association with ISM and the International Federation of Purchasing and supply Management (IFPSM).

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. The J.P. Morgan Global Manufacturing PMI provides advance insight into the global manufacturing sector, which gives investors a better understanding of business conditions and valuable information about the economic backdrop of global markets. The stock market likes to see healthy economic growth because that generally 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 data are also used by many Central Banks to help make interest rate decisions.

The J.P. Morgan Global Manufacturing PMI data give a detailed look at the manufacturing sector including the pace of manufacturing growth and the direction of growth for this sector. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. In addition, its sub-indexes provide a picture of output, employment, new orders and prices.