The S&P Taiwan manufacturing PMI survey indicates that the ongoing contraction in the sector seen in recent months continued in May and at a more pronounced rate, with the headline index falling to 44.3 from 47.1 in April. This takes the index back to around where it was at the start of the year. Respondents cited ongoing weakness in external demand as the main factor weighing on activity but also expect some improvement in conditions over the next year.

Survey respondents reported bigger falls in output, new orders, and new export orders in May, while payrolls were reported to have fallen for the fifth consecutive month and at the fastest pace in more than three years. The survey's measure of business confidence, however, improved for the second consecutive month, perhaps reflecting an assessment that output is close to a trough. The survey also shows weaker price pressures, with respondents reporting a reduction in both input costs and selling prices.

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.