Official Chinese PMI survey data indicate that growth in China's aggregate economy has continued to slow after picking up early in the year, with the data showing ongoing contraction in the manufacturing sector and weaker expansion in the non-manufacturing sector. Today's data are broadly in line with the assessment of senior Chinese leadership, reported last week, that China's economic recovery is"wave-like" and"tortuous" and continues to face"difficulties and challenges", including insufficient domestic demand and a"severe" external environment. Despite their concerns about the pace of recovery, the report indicated that officials do not currently envisage a need for a major shift in policy settings.

The headline index for the CFLP manufacturing PMI rose from 49.0 in June to 49.3 in July, above the consensus forecast of 48.9 but indicating contraction in the sector for the fourth consecutive month. The CFLP non-manufacturing PMI survey's headline index indicates further but more modest expansion. It has now fallen for four consecutive months, dropping from 53.2 in June to 51.5 in July, below the consensus forecast of 53.1. The composite index covering the entire economy fell from 52.3 in June to 51.1 in July, its lowest level since last December.

Today's data are mixed relative to expectations. The China ECDI rose from minus 16 to 5 and the ECDI-P rose from minus 3 to 14, indicating that data are currently outperforming market expectations.

The CFLP manufacturing PMI is expected to hold steady at 48.9 in July from June's 49.0 while the non-manufacturing PMI, which in June fell more than a point to 53.2, is expected at 53.1.

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.