Official Chinese PMI survey data indicate that China's aggregate economy expanded in May for the sixth consecutive month but at a slower pace, with the data showing sharper contraction in the manufacturing sector and weaker growth in the non-manufacturing sector. Today's data suggest that the recovery in Chinese economic conditions remains tentative and uneven across sectors.

The headline index for the CFLP manufacturing PMI fell from 49.2 in April to 48.8 in May, its lowest level since December and below the consensus forecast of 49.7. The CFLP non-manufacturing PMI survey's headline index also fell from 56.4 to 54.5, also falling short of the consensus forecast of 55.0. The composite index covering the entire economy fell from 54.4 in April to 52.9 in May.

The CFLP manufacturing PMI is expected to improve slightly to 49.7 in May after sinking back below the breakeven 50 level to 49.2 in April. The non-manufacturing PMI, after slowing by 2.2 points to 56.4 in April, is expected to fall back 1.4 points to 55.0.

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.