Main points
Production resumed and prices fell
In November, manufacturing PMI stopped falling and rebounded, returning to the expansion range. The recovery of production is the main reason for the rebound of PMI this month. Supply recovers faster than demand. With the multi pronged implementation of various energy supply and price stabilization policies, the power supply continued to improve and the production and operation of enterprises resumed. The production index rose to the expansion range. On the demand side, there is a weak recovery, and the improvement is far less than that of production. The prosperity of foreign trade continued to rise. The arrival of overseas Christmas season will further boost overseas demand and support the strength of exports. Recently, the new variant virus once again triggered the “closure” of some countries, or further prolonged the recovery time of the global supply chain, which still needs to be observed. But on the whole, with the subsequent changes in the impact of the epidemic, the highlight of China’s foreign trade gradually subsided, and the decline in exports in the future is still a probability event. Although the time is delayed, the changes in the epidemic situation at home and abroad only affect the process and rhythm of the change, and will not affect the direction. The price index fell rapidly, with a large decline, especially the ex factory price directly fell below the critical point. In November, the prices of major commodities fell, the effect of ensuring supply and stabilizing prices was significant, and the inflection point of PPI was imminent. Production recovery, enterprise replenishment. The recovery of production has led to an obvious recovery in the relevant inventory and purchase volume of enterprises. The fall in raw material prices also contributes to the recovery of demand. Enterprises’ orders in hand, raw material inventory and finished product inventory all rebounded significantly. These three indexes hit a new low in October. After the elimination of supply constraints, enterprises also showed the power to replenish inventory, and the purchase demand rebounded.
Non manufacturing remained stable. The non manufacturing business activity index was 52.3%, down 0.1 percentage points from the previous month. The service industry has slowed down due to the frequent epidemic in China. However, the expansion of the construction industry accelerated. The business activity index and new order index of the civil engineering construction industry were 60.5% and 56.5% respectively, an increase of 5.4 and 0.5 percentage points over the previous month, indicating that infrastructure activities have accelerated. With the accelerated issuance of special bonds, infrastructure has been boosted. According to the requirements of the national standing committee, in the face of new downward pressure, infrastructure is the starting point, and it is expected to continue to accelerate with the help of special bonds.
In November, the manufacturing industry stopped falling and rebounded, returning to the expansion range. After production resumed and supply constraints were eliminated, prices fell and orders rebounded. The improvement of manufacturing industry is also expected to ease the downward pressure on the economy.
The combination pattern of “high inflation” and “flat economy” remains unchanged
The combination pattern of “high inflation” and “flat economy” has not changed, and the worry of “stagflation” in the market can not be completely eliminated. The reality supporting inflation expectations is the high commodity prices that have lasted up and down for one year and the resulting high PPI, and concerns are transmitted to the downstream CPI; The economic outlook is expected to lie in the dual weak reality of investment and consumption, which is sustained by the housing bubble and epidemic situation. The period of economic transformation will experience a long period of “bottom wandering”, so the sustained soft economic growth has its phased characteristics, and the excessive catalysis to the real estate industry in the early stage has prolonged this process. During the economic downturn, deflation is a more realistic hidden worry than inflation; Due to the weak terminal demand, the current high PPI is difficult to transmit to the downstream. Globally, the high inflation in the main core economies is temporary – the high inflation in the United States in 2021 comes from the substantial appreciation of the RMB exchange rate, the cancellation of the German tax preference system in the euro area, and the poor supply chain in the UK. Overall, the factors leading to high inflation in these core countries will disappear in 2022.
