The S&P PMI manufacturing index rose to 48.5, up from the mid-month flash estimate of 47.8 but still below the 50-growth threshold. This signals that the manufacturing economy is contracting, even as the latter half of October outperformed the earlier half. At 48.5 the PMI manufacturing index is higher than both the consensus estimate (47.0) and September's final (47.3).

This contraction is due to a decline in new orders. Demand was weakened by political uncertainty around the Presidential Elections, leading to caution among clients. Firms also reduced employment for the third consecutive month.

Input cost inflation eased for the second month in a row, with input prices being high only in certain areas such as raw materials; cardboard, metal and packaging as well as rising prices for freight.

Similarly, output prices increased at a much slower pace in October easing after last month's five-month high.

The report suggests that optimism is still high with firms hoping new business will pick up following the Presidential Election. Higher sales and lower interest rates also supported this confidence, even as demand remained muted.

The consensus looks for 50.3 for the UK PMI manufacturing index versus 51.5 a month ago and 50.3 in the October flash.

Based on monthly questionnaire surveys of selected companies, the Purchasing Managers' Manufacturing Index (PMI) offers an advance indication on month-to-month activity in the private sector economy by tracking changes in variables such as production, new orders, stock levels, employment and prices across manufacturing industries. The final index for the current month is released roughly a week after the flash.

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 Markit PMIs in the U.S. and 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 Markit 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.

Markit originally began collecting monthly Purchasing Managers' Index (PMI) data in the U.S. in April 2004, initially from a panel of manufacturers in the U.S. electronics goods producing sector. In May 2007, Markit's U.S. PMI research was extended out to cover producers of metal goods. In October 2009, Markit's U.S. Manufacturing PMI survey panel was extended further to cover all areas of U.S. manufacturing activity. Back data for Markit's U.S. Manufacturing PMI between May 2007 and September 2009 are an aggregation of data collected from producers of electronic goods and metal goods producers, while data from October 2009 are based on data collected from a panel representing the entire U.S. manufacturing economy. Markit's total U.S. Manufacturing PMI survey panel comprises over 600 companies.