Official Chinese PMI survey data indicate that China's aggregate economy remained close to stagnation in December, with the data showing a bigger contraction in the manufacturing sector and another month of very subdued conditions in the non-manufacturing sector. Today's data suggest China's economy remains weighed down by weakness in the property market despite recent measures aimed at improving liquidity conditions.

The headline index for the CFLP manufacturing PMI fell from 49.4 in November to 49.0 in December, below the consensus forecast of 49.9 and indicating contraction in the sector for the eighth time in the last nine months. The CFLP non-manufacturing PMI survey's headline index rose slightly from 50.2 to 50.4, matching the consensus forecast. The composite index covering the entire economy fell from 50.4 in November to 50.3 in December.

Today's data underperformed expectations, with the China RPI falling from plus 7 to minus 21 and the RPI-P falling from plus 20 to minus 20, indicating that data are now coming in below market expectations.

The CFLP manufacturing PMI is expected to increase to 49.9 in December from November's 49.4 which came in 2 tenths lower than expected and 1 tenth lower than October. while the non-manufacturing PMI, which in November fell 4 tenths to 50.2 and missed the consensus by 9 tenths, is expected to increase slightly to 50.4.

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.