The S&P Global China manufacturing PMI survey's headline index fell from 50.6 in September to 49.5 in October, indicating renewed contraction in the sector after two months of modest expansion. Official PMI survey data published earlier in the week also showed a return to contraction in the sector in October. The PMI surveys published this week suggest that momentum in the Chinese economy's recovery has stalled again despite recent steps to loosen policy and improve liquidity conditions. This may strengthen the case for further policy adjustments in coming weeks.

Respondents to the S&P PMI survey reported output fell in October after increasing in each of the two previous months, with the survey also showing weaker growth in new orders and the fourth consecutive decline in new export orders. Payrolls were also reported to have been cut at the fastest pace since May, while the survey's measure of business confidence fell to its lowest level in just over twelve months. Price pressures were reported to have strengthened in October with the survey showing input costs rose at the fastest pace since January and the second consecutive increase in selling prices.

Today's data were well below the consensus forecast of 50.8 the headline index. The China RPI fell from plus 9 to plus 7 and the RPI-P fell from plus 25 to plus 7, indicating that recent Chinese data in sum are coming in near the consensus forecasts.

After 50.6 in September, which was a half point lower than expected, S&P's manufacturing PMI in October is expected to edge 2 tenths higher to 50.8.

The S&P Manufacturing Purchasing Managers' Index (PMI) is based on monthly a questionnaire that surveys of over 500 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 S&P 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.