Official Chinese PMI survey data show conditions in China's aggregate economy deteriorated in May. The headline index for the CFLP manufacturing PMI fell from 50.4 in April to 49.5 in May, below the consensus forecast of 50.4 and indicating renewed contraction in the sector. The CFLP non-manufacturing PMI survey's headline index fell slightly from 51.2 to 51.1, also below the consensus forecast of 51.3. The composite index covering the entire economy fell from 51.7 in April to a three-month low of 51.0 in May.

Today's data were weaker than consensus forecasts, with the China RPI falling from minus 21 to minus 36 and the RPI-P falling from minus 30 to minus 50, indicating that data are coming in well below market expectations.

The CFLP manufacturing PMI is expected to hold steady at 50.4 in May. The non-manufacturing PMI is expected at 51.3 versus April's 51.2 which was nearly 2 points below March and a full point below the consensus.

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.