The S&P Global China manufacturing PMI showed renewed contraction in the sector after eight months of expansion, with the headline index falling sharply to 49.8 from 51.8 in July. This is its lowest level since October 2023. Official PMI survey data published earlier in the week also showed that conditions in the sector were close to stagnant in July.

Respondents to the S&P PMI survey reported output grew at the slowest pace in nine months, new orders fell for the first time in a year, and new export orders rose at a less pronounced pace. Payrolls were reported to have fallen slightly in July but the survey's measure of business confidence rose after it had dropped in June to its lowest level in more than two years. The survey also shows price pressures moderated, with its measure of growth in input costs slowing and selling costs reported to have been cut for the first time since May.

Today's data were well below the consensus forecast of 51.5. The China RPI and RPI-P both fell to zero from plus 7 and plus 17 respectively, indicating that data are coming at market expectations.

After 51.8 in June, S&P's manufacturing PMI in July is expected to only ease slightly to 51.5. This index has held in plus-50 ground for nine straight months.

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.