The final UK manufacturing PMI was 47.0, down from the flash estimate of 47.3 and November's final of 48.0. The implied contraction in activity was the steepest in 11 months.

This was the third consecutive print below the 50-growth threshold and reflected declines in output, new orders and employment. Destocking at client level, lessened market confidence and operational restructuring in response to the forthcoming legislative changes hit output and demand negatively with manufacturing production contracting for the second consecutive month in December.

Business optimism also dipped to a two-year low as outlook weakened. Manufacturers reported concerns about lack of market confidence, inflationary pressures, rising costs and expectations of weaker economic growth ahead.

December saw an uptick in purchase price inflation possibly due to the rising transport costs and raw material prices, as well as the pass through of higher employment costs by suppliers. There were also reports of rising global market prices, material shortages, taxes and currency fluctuations which led to manufacturers proactively raising their selling prices. Supply-chain pressures continued to build, as the ongoing Red Sea crisis and disruptions to shipping and at ports led to an increased incidence of delivery delays.

The latest results trim the UK RPI to minus 18 and the RPI-P to minus 27. Overall economic activity is falling behind market expectations.

No revision from the 47.3 flash is the call for PMI manufacturing final.

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 3,000 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The survey covers more than 600 industrial companies and is compiled by the Chartered Institute of Purchasing and Supply (CIPS) and 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 ISM manufacturing index in the U.S. and the and S&P Global PMIs 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 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.