The final data for December showed manufacturing activity falling slightly more rapidly than originally reported. At 46.2, the final sector PMI was down to 0.2 points versus its flash estimate and a full point short of November's 7-month high. This made for a 17th straight month below the 50-expansion threshold.

Output, new orders and employment all declined again with the drop in demand reflecting weakness in both the domestic and overseas markets. Indeed, production would have seen a steeper decrease but for unfilled orders which were pared further. Against this backdrop, business optimism about the year ahead also worsened, dipping to a 12-month low albeit still just about remaining positive.

Meantime, inflation pressures were mixed. Input costs were down again but factory gate prices rose, although only very modestly, for a second successive month as firms sought to protect margins.

In line with the rest of Europe, UK manufacturing had a difficult 2023 and ended last quarter on a clearly soft note. Weak demand suggests that near-term prospects for goods production remain poor and with inflation pressures in the sector very limited, upcoming data should support speculation about a cut in Bank Rate before the second quarter is out. Today's update means the UK RPI starts the year at minus 28 and the RPI-P at minus 17. Both measures show recent overall economic activity falling short of market expectations.

No revision is expected to the flash data leaving the sector PMI at 46.4, down from November's final 47.2.

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 3,000 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The survey covers more than 600 industrial companies and is compiled by the Chartered Institute of Purchasing and Supply (CIPS) and S&P Global.

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 ISM manufacturing index in the U.S. and the and S&P Global PMIs elsewhere, 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 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.