viewpoint
After the impact of switching off and power rationing in September and October 2021, Chinese production ushered in a "breathing" opportunity in January, and the manufacturing PMI hit the bottom and rebounded. Among them, the production side benefited from the decline in raw material prices and the slowdown in power rationing, resulting in over seasonal improvement; Domestic demand continues to benefit from the expected mitigation of enterprise cost pressure, external demand benefits from the strong export demand for Christmas products, and China's export orders have further improved, but they are still lower than the boom and bust line. In terms of non manufacturing industry, the service industry is subject to the repeated epidemic situation and its performance is flat; The performance of real estate and infrastructure in the construction industry was differentiated, and the overall chain was improved.
The manufacturing industry walked out of the "headwind" of production, and the manufacturing PMI improved over seasonality in January. In November, the manufacturing PMI was 50.1%, It was 0.9 percentage points higher than that in October (Figure 1). From the sub items, in addition to the deterioration of the supplier's distribution time, the production, new orders, employees and raw material inventory improved, among which the production and raw material inventory improved the most (Figure 2). We believe that this is mainly because (1) the epidemic situation in northern provinces affected the supplier's distribution speed in November; (2) In October, PMI production and raw material inventory were dragged down by tight power supply and high raw material prices, thus forming a low base; since November, with the appearance of the effect of the state on cracking down on commodity speculation, the prices of main raw materials for industrial production such as power coal and rebar have dropped significantly (Fig. 3), and the year-on-year decline of rebar output has narrowed compared with that in October (Fig. 4).
On the demand side, China's and export orders further improved in January, but they are still below the boom and bust line. The PMI of new orders in November rose 0.6 percentage points to 49.4% compared with October, which was flat month on month and seasonal. We believe that the improvement in demand benefits from the expected easing of enterprise cost pressure caused by the decline in raw material prices. Export orders improved seasonally. In November, PMI of new export orders rose to 48.5% over the season. According to the feedback from the port, the export of Christmas goods was strong in November, and the export of foreign trade containers is expected to be better than that in October. Despite the month on month improvement, the demand index is still below the boom and bust line, reflecting the continued downward pressure on China's economy.
Small and medium-sized enterprises benefited from the boom in import and export demand, and the improvement rate exceeded that of large enterprises. In terms of enterprise types, the manufacturing PMI of large, medium and small enterprises in November were 51.7%, 54.8% and 48.8% respectively, 1.6%, 7.3 and 3 percentage points higher than that in October. Among them, the improvement of medium-sized enterprises benefited most from the improvement of imports (up 4.6 percentage points month on month) and new orders (up 2.7 percentage points month on month); although small enterprises benefited most from the improvement of new export orders (up 5.3 percentage points month on month), their PMI was still lower than the boom and bust line, and their business situation was still lower than that of medium-sized and large enterprises.
In the non manufacturing sector, the performance of the service sector was flat, and the construction industry benefited from improved demand. In January, the PMI of service industry decreased by 0.5 percentage points to 51.1% compared with October, It is significantly lower than the seasonality (Figure 5) (the average month on month in October 2016-2019 was + 0.9 percentage points), and the performance of each sub item is poor. We believe that it is mainly because the end of the year is the traditional peak season of the service industry, and the current service industry is still subject to the recurrence of local epidemics. Due to the differentiation of real estate and infrastructure, the PMI of the construction industry in January rose by 2.2 percentage points to 59.1% compared with October (Figure 6). By item, in the construction industry, the new order index improved, the input prices fell, and the business activity expectations fell. We believe that the new order index rose month on month, benefiting from the acceleration of the issuance of special bonds (Figure 7) (at the end of October, the Ministry of finance made it clear that the amount of new special bonds in 2021 should be issued as soon as possible before the end of November); the decline in the expected index of business activities may be affected by the recent tightening of the supervision of pre-sale funds of real estate enterprises in many parts of the country.
Combined with PMI data in January, We believe that in the fourth quarter: (1) manufacturing investment is expected to further improve, especially in export-oriented industries (such as general equipment, electrical machinery, special equipment and automobile manufacturing) and downstream price rising industries (such as food, agricultural and sideline food processing and manufacturing); (2) due to the impact of supervision, new construction and construction are still not optimistic; (3) Infrastructure investment is expected to benefit from the issuance of special bonds to accelerate the stabilization and recovery.
Risk warning: local epidemic spread exceeded expectations; Policy changes exceeded expectations
