Manufacturing PMI was in the boom range for four consecutive months
Since the manufacturing PMI reached a high of 51.9% in March 2021, it has fallen for seven consecutive months. From September to October, it was below 50% of the boom range. Since the rebound in November, it has been in the boom range for four consecutive months, but the boom level is only slightly higher than the critical point.
The price rise of raw materials is transmitted to the product end, squeezing industrial profits
Compared with January, in the PMI composition index, the purchase price and ex factory price of main raw materials increased significantly, up 3.6 percentage points and 3.2 percentage points respectively. Affected by the recovery of the international supply chain, the supply of bulk commodities has been slightly weaker than the demand since 2021. Recently, affected by the escalation of the international geopolitical situation, it has exacerbated the expectation of insufficient supply of bulk commodities such as crude oil, natural gas, aluminum and grain, resulting in a large increase in the price of raw materials, some of which are transmitted to the ex factory price, and squeezed the industrial profits.
Active fiscal policy and prudent monetary policy are expected to further boost the recovery of the manufacturing boom index
New orders and imports have a certain pulling effect on the index, both up 1.4 percentage points compared with January. New orders have returned to the boom range since August 2021. Although imports increased significantly compared with the previous month, they were below the boom range. Production activity is expected to be more positive, with the index recording 58.7%, an increase of 1.2 percentage points over January.
Over the years, affected by the Spring Festival holiday, the PMI generally showed a downward trend in February. This year's Spring Festival is located in early February, and the resumption time is earlier. During the festival, the local new year policy and relatively strong external demand, combined with the positive fiscal policy and prudent monetary policy, offset the seasonal decline of the PMI index.
Officials and the market have long predicted the growth pressure in 2022. Since the second half of last year, especially since November, the strength of the steady growth policy has been increasing. We believe that the proactive fiscal policy has been gradually strengthened in the first quarter, the loose credit environment has provided stable financial support for manufacturing investment, and the prosperity of the manufacturing industry is expected to be further improved. It should be noted that due to the impact of the Russian Ukrainian war and global sanctions against Russia, energy prices do not have the conditions to decline in the short term, the current prices of non-ferrous metals and ferrous metals are at a high level, and the expectation of rising food prices is enhanced, which will have an impact on the manufacturing PMI index.
Risk tips
The effect of policy implementation is not as expected, the epidemic situation worsens, the local debt risk erupts intensively, and the international political and financial risk worsens.
