The manufacturing PMI fell from 49.7 in November to 48.3 in December, signaling a deterioration in business conditions within the goods-producing sector for a sixth month in a row with the rate of deterioration accelerating to the fastest since September.

The services PMI grew sharply from 56.1 in November to 58.5 in December, reaching an impressive 38-month high.

Future sentiment after slumping to a 23-month low in September and rebounding in October, reached a 2 and a half year high showing growing optimism about business conditions under the incoming Trump administration. Employment also edged higher, up for the first time in five months, as firms expanded workforce numbers amid the brighter outlook.

Details for manufacturing include a 1.9-point decline in output to 46.0, a 55-month low. There were also reports of slight pull-back in future expectations, in part reflecting worries over the impact of tariffs and inflation.

Inflationary pressures cooled further in December, however, there was a jump in input cost inflation in manufacturing. The average price charged for goods and services rose very modestly, increasing at the slowest rate since prices began rising in June 2020.

The PMI composite weighed overwhelmingly towards services, rose from 54.9 in November to 56.6 in December, signaling a sustained expansion of business activity. By sector, growth remained uneven, with the service sector growing at a strong steady rate while manufacturing output continued to decline.

The composite is expected to remain nicely in expansion at 54.6 in the December flash versus 54.9 in November. Manufacturing is seen at 49.6 versus 49.7 in November and 48.5 in October. Services is expected at 55.9 after rising to 56.1 in November from 55.0 in October.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector output by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. The flash data are released around 10 days ahead of the final report and are typically based upon around 85 percent of the full survey sample. The report tracks changes in variables such as new orders, stock levels, employment and prices across both manufacturing and services. Production is also tracked, defined as"production" for manufacturing and"output" for services. Results are synthesized into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster output is growing (contracting). The report also contains flash estimates of the manufacturing and services PMIs. The data are produced by 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 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.