Official Chinese PMI survey data indicate that growth in China's aggregate economy improved modestly for the second consecutive month in September, with the data showing little change in the manufacturing sector and slightly stronger expansion in the non-manufacturing sector. Today's data suggest activity in the Chinese economy remains subdued but has improved in response to recent steps to loosen policy and improve liquidity conditions.

The headline index for the CFLP manufacturing PMI rose from 49.7 in August to 50.2 in September, just above the consensus forecast of 50.1 and indicating expansion in the sector for the first time in six months. The CFLP non-manufacturing PMI survey's headline index rose after five consecutive declines, increasing from 51.0 to 51.7, also just above the consensus forecast of 51.5. The composite index covering the entire economy rose from 51.3 in August to 52.0 in September.

Today's data outperformed expectations. The China RPI rose from plus 7 to plus 36 and the RPI-P rose from minus 10 to plus 30, indicating that data are now coming in above market expectations.

The CFLP manufacturing PMI is expected to increase slightly to 50.1 in September from August's 49.7 while the non-manufacturing PMI, at 51.0 in August, is expected to increase to 51.5.

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.