Event: in December, the manufacturing PMI was 50.3, the expected value was 50.5, and the previous value was 50.1; In December, the PMI of non manufacturing industry was 52.7, the previous value was 52.3.
In December, the business condition index (BCI) of Chinese enterprises was 53.0, the previous value was 49.2.
Manufacturing: the overall outlook of the manufacturing industry has stabilized and improved. The supply continues to repair, and the repair speed decreases slightly due to seasonal factors; The overall demand is still weak, but it has improved slightly compared with the previous month. Domestic demand is better than external demand, prices continue to fall, and inventories pick up.
In December, the manufacturing PMI was 50.3%, up 0.2 percentage points from the previous value, above the boom and bust line for two consecutive months. Specifically:
1) The supply continued to be repaired as a whole, but the repair speed slowed down due to the off-season in December; Demand has improved slightly, but it is still weak, and domestic demand is slightly better than external demand. On the supply side, PMI production in December was 51.4%, down 0.6 percentage points from the previous value. On the one hand, the dual control of energy consumption was relaxed. Under the policy of “ensuring supply and stabilizing price” of the national development and Reform Commission, industrial production continued to be repaired, and PMI production was above the boom and bust line for two consecutive months. High frequency data showed that the average coal inventory of Qinhuangdao port in December was 4.98 million tons, lower than 5.46 million tons in November, but higher than 3.9 and 4.2 million tons from September to October; On the other hand, as the weather turns cold, industrial production enters the off-season in December, and PMI production is slightly weaker than that in November. High frequency data show that as of the fourth week of December, the blast furnace operating rate is 46%, lower than 48% at the end of November; PTA operating rate of chemical industry also decreased compared with November. On the demand side, in December, PMI new orders and new export orders rose by 0.3% and fell by 0.4 percentage points to 49.7% and 48.1% respectively compared with the previous month, and the overall situation is still low. Among them, PMI new orders have been lower than the boom and bust line for five consecutive months, and PMI new export orders have been lower than the boom and bust line for eight consecutive months. According to the Bureau of statistics, the prosperity of new orders in industries such as medicine, automobile, computer communication and electronic equipment is high. In addition, PMI imports rose 0.1 percentage point to 48.2%, lower than the boom and bust line for seven consecutive months. From this perspective, demand picked up slightly in December, but it was still weak. PMI new orders and PMI imports rebounded, while PMI new export orders fell, reflecting that domestic demand was slightly better than external demand.
2) Export orders have been weak for eight consecutive months, but the margin has improved in the last two months, superimposed with high freight rates. It is expected that exports will still be resilient in December. As of December, PMI’s new export orders had been in the contraction range for eight consecutive months, but exports still maintained a high growth of more than 20% year-on-year. In previous reports, we have pointed out that the deviation between the two is related to PMI leadership, freight rate rise and other factors. In view of the marginal improvement of PMI’s new export orders from November to December, the Baltic dry bulk index (BDI) and China’s export container freight index (CCFI) rose by 1.9% and 0.2% month on month respectively in December. It is expected that exports in December will still be resilient under the support of repeated epidemic and overseas Christmas and new year demand. Maintain our view in the report on the impact of Omicron on global economy and monetary policy. Under the impact of Omicron, if the repair of the global supply chain is blocked, China’s export substitution logic is expected to be strengthened, that is, the logic of epidemic prevention materials + Home Office + export substitution + price support during the repeated epidemic; Even if Omicron is effectively controlled, the global supply chain repair may increase the demand for Chinese intermediate products, and the export is expected to have no stall risk. Overall, the impact of the epidemic is positive, and China’s exports may be resilient and downward next year.
3) The policy effect of “ensuring supply and stabilizing price” continues to show, and the price decreases month on month. It is expected that the PPI will continue to decline year-on-year in December; The negative gap between the ex factory price of PMI and the purchase price of raw materials narrowed for two consecutive months, and the cost pressure of enterprises was relieved; Enterprise inventory rebounded. In terms of price, the purchase price and ex factory price of PMI raw materials in December fell by 4.8 and 3.4 percentage points respectively to 48.1% and 45.5% compared with the previous value, of which the ex factory price fell below the boom and bust line for two consecutive months. Combined with the 3.3% month on month decline of the price index of means of production as of December 24, it is expected that the PPI in December will fall by 0.6% month on month and about 11% year-on-year. In addition, the PMI ex factory price minus the purchase price of PMI raw materials is – 2.6%, and the negative gap narrowed (from – 11% in October to – 4% in November), which also shows that the pressure on the cost of raw materials is gradually alleviated. In terms of inventory, the inventory of PMI raw materials and finished products rose by 1.5 and 0.6 percentage points to 49.2% and 48.5% respectively in December, which is related to the decline of procurement cost in December, the acceleration of goods preparation and the increase of supply.
Non manufacturing industry: the prosperity of service industry rebounded, and the prosperity of transportation, catering, entertainment and other industries was greatly disturbed by the epidemic in the early stage; High frequency data show that real estate sales improved month on month, still poor year-on-year, and the boom recovery still needs to wait; The boom of the construction industry has fallen, the issuance of special bonds in the early stage has not significantly boosted the infrastructure, and the cold wave and “two festivals” have also dragged down the construction.
In December, the PMI business activity index of non manufacturing industry rebounded 0.4 percentage points month on month to 52.7%, which was in the expansion range for four consecutive months.
Among them, the PMI of the service industry rebounded by 0.9 percentage points to 52.0%. Combined with the analysis of the Bureau of statistics, the improvement of the outlook of the service industry is related to the continuous prosperity in the fields of radio and television, money and finance, as well as the marginal improvement of the prosperity of industries affected by the epidemic in the early stage, such as transportation, catering and entertainment. High frequency data show that the city’s real estate sales improved month on month on December 30, and the year-on-year decline is still expanding. The stabilization and recovery of the real estate boom still needs to wait and observe. The PMI of the construction industry and the PMI of new orders in the construction industry fell by 2.8 and 4.2 percentage points to 56.3% and 50.0% respectively, indicating that the physical workload has not been significantly formed in the early issuance of special bonds. The cold weather and the approaching of the “two festivals” also make the construction enter the off-season, and the outlook of the construction industry has declined.
Small and medium-sized enterprises and Employment: PMI shows that the prosperity of small enterprises is still poor, but BCI index shows that the profits of private small and medium-sized enterprises have improved; The overall employment value has improved compared with the previous value, but the PMI of manufacturing and service industries has been lower than the boom and bust line for a long time, indicating that the foundation for employment recovery is not firm.
1) By enterprise type, the prosperity of PMI small enterprises is still poor, showing weak supply and demand, but BCI index shows that the profits of private small and medium-sized enterprises have improved. In December, the PMI of large, medium and small enterprises changed by 1.1, 0.1 and – 2.0 percentage points to 51.3%, 51.3% and 46.5% respectively, indicating that the prosperity of large enterprises has improved significantly, the prosperity of small enterprises has decreased and is in the contraction range for 8 consecutive months; From the perspective of sub indicators, PMI small enterprise production and new orders fell by more than 3 percentage points compared with the previous value, indicating that the supply and demand of small enterprises are weak. However, this conclusion deviates from the China business condition index (BCI). The BCI index mainly measures private small and medium-sized enterprises. In December, the BCI index rebounded 3.83 percentage points from the previous value to 53%. Overall, it shows the characteristics of volume increase and price decrease: that is, the forward-looking indexes such as sales and investment representing “volume” rise, and the cost and price indexes representing “price” fall. In addition, the BCI enterprise profit outlook index rebounded significantly by 7.68 percentage points to 54.75% compared with the previous value, forming a strong support for the BCI index. Historically, PMI small enterprises have deviated from BCI index, which may be related to differences in enterprise scale, nature, region and other dimensions.
2) Employment has improved, but the recovery is not yet solid. In December, the employment index of manufacturing industry, service industry and construction industry rebounded by 0.2, 0.2 and 0.5 percentage points respectively to 49.1%, 46.8% and 51.8%, indicating that employment has improved. However, it should be noted that the PMI of employees in manufacturing and service industries has been lower than the boom and bust line for 9 consecutive months or more, indicating that the foundation for employment recovery is not firm.
Standing at the end of 2021, the good side is that we see that the economic prosperity continues to improve and the structural contradiction between supply and demand continues to ease.
Although demand remains weak, it has improved marginally over the previous month. In addition, the pressure on raw material costs eased, manufacturing prices fell and inventories rose.
The drag of the epidemic weakened and the service industry improved. However, the disadvantage is that although the real estate has improved slightly month on month, the year-on-year data is still poor, and the infrastructure has not yet erupted; The prosperity of small enterprises is still poor; The marginal employment has improved, but the foundation for recovery is not yet solid. Looking forward to 2022, standing at a new starting point, the easing of the contradiction between supply and demand is expected to continue, and the lag in maintaining the stability of real estate policies will also be reflected in the real estate data. Under the demand of stable growth, infrastructure is expected to advance in the first quarter of next year. Concerns: 1) the monetary policy is stable and loose, and the reserve requirements and interest rates may be reduced again, and the broad fiscal growth will remain high next year; 2) As for steady growth, compared with consumption, investment is more likely to exceed expectations, such as new and old infrastructure (transportation, green, digital, intelligent, etc.); High end manufacturing, middle and downstream manufacturing, affordable housing and urban renewal.
Risk statement
The downward speed of real estate exceeded expectations, and the implementation of policies was less than expected.
（ Huaan Securities Co.Ltd(600909) ）
