China's manufacturing sector showed expansion for the third straight month in December but the pace of growth as indicated by the Caixin purchasing managers index unexpectedly slowed to 50.5 (vs. consensus 51.6) after rising to 51.5 in November from 50.3 in October. The slowdown was caused by lower growth in new orders and production while weak exports dampened sales.

The Chinese economy is struggling to recover from the slump triggered by property market debt problems, prompting Beijing to promise more fiscal and monetary stimulus measures amid heightened global uncertainty. U.S. President-elect Donald Trump has threatened to impose a 25% tariff on all goods from Mexico and Canada, and an additional 10% tariff on imports from China, all part of his drive to crack down on illegal drugs and immigration.

Official data released this week also showed that CFLP PMI unexpectedly slipped to 50.1, just above the neutral line of 50, after firming to 50.3 in November from 50.1 in October, when the PMI posted its first expansion in six months.

The Caixin manufacturing PMI is seen firming to 51.6 in December from 51.5 in November. The Caixin index continues to outperform the official manufacturing PMI, which has barely broken above the 50 neutral level.

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.