Official Chinese PMI survey data show modest improvement in China's aggregate economy in January, with the data showing a smaller contraction in the manufacturing sector and slightly stronger growth 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 rose from 49.0 in December to 49.2 in January, just below the consensus forecast of 49.3 and indicating contraction in the sector for the ninth time in the last ten months. The CFLP non-manufacturing PMI survey's headline index rose from 50.4 to 50.7, just above the consensus forecast of 50.5. The composite index covering the entire economy rose from 50.3 in December to a four-month high of 50.9 in January.

Today's data were close to consensus forecasts, with the China RPI falling from zero to minus 7 and the RPI-P falling from plus 10 to minus 8, indicating that data are still coming in close to market expectations.

The CFLP manufacturing PMI is expected to increase slightly to 49.3 in January from December's 49.0 which was lower than expected and down from November's 49.4. The non-manufacturing PMI, which in December was flat at an as-expected 50.4, is expected to hold little changed at 50.5.

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.