Event: according to the data of the National Bureau of statistics, in March 2022, China's Manufacturing Purchasing Manager Index (PMI) was 49.5%, 0.7 percentage points lower than that of the previous month, falling into the contraction range for the first time in nearly five months; In March, the non manufacturing business activity index was 48.4%, 3.2 percentage points lower than the previous month, and fell into the contraction range for the first time in nearly seven months.
Comments are as follows:
In March, the PMI indexes of manufacturing and non manufacturing industries fell to the contraction range, and the decline was significantly larger, mainly due to the large-scale recurrence of the recent epidemic in China. This is particularly reflected in the impact on the service industry: the business activity index of the service industry in March was 46.7%, a sharp decrease of 3.8 percentage points compared with the previous month, which is in line with the general law that the impact of the epidemic on the service industry is more significant. Specifically, the PMI data of March has the following concerns:
First, manufacturing PMI and non manufacturing PMI fell to the contraction range at the same time, which means that the strong consumption, investment and industrial production data from January to February are not sustainable, and these indicators will decline to a certain extent in March. The communiqu é of the regular meeting of the monetary policy committee of the central bank in the first quarter of 2022 released on March 30 stressed that the current economic development is still facing "triple pressure of demand contraction, supply shock and weakening expectation". The national standing committee meeting held on March 29 also clearly pointed out that "the current international situation is becoming more complex and severe, China's development is facing new challenges, and the downward pressure on the economy is further increasing".
Secondly, the price index in PMI rebounded in March, mainly because the Russian Ukrainian war is significantly pushing up the prices of upstream industrial products such as crude oil, natural gas and some non-ferrous metals. At the same time, it also means that the operation difficulties of downstream industries, especially small and micro enterprises, are intensifying. In March, the PMI of small enterprises was 46.6%. Although it was still in the contraction range, it increased by 1.5 percentage points compared with the previous month. We judge that this may be related to the overweight of targeted support policies for small and micro enterprises in the early stage. However, with the downward transmission of upstream prices, weak terminal consumption and the difficulty of sharp upward core CPI, the PMI index of small enterprises will continue to be in the deep contraction range, which does not rule out the possibility of falling in April.
Third, the business activity index of the construction industry in March was 58.1%, an increase of 0.5 percentage points over the previous month, and continued to improve at a very high economic level, mainly driven by the accelerated promotion of stable investment in the near future and the moderately advanced development of some major infrastructure projects and projects. This largely offset the drag of the real estate decline on the PMI index of the construction industry. We expect that in the short term, driven by the acceleration of infrastructure investment, the growth rate of fixed asset investment will continue to maintain a high growth rate and become the main supporting factor for stabilizing the macro-economic market. The national standing committee meeting held on March 29 required that the amount of special bonds issued in advance last year should be issued before the end of May and the amount issued this year should be issued before the end of September. At the same time, it was required to speed up the commencement and construction of the project and form the physical workload as soon as possible. This shows that there is still potential for infrastructure investment in the future.
Finally, there is great uncertainty in the two major factors affecting the trend of PMI - China's epidemic situation and external geopolitical conflict. The PMI index is likely to remain in the contraction range in the short term. This means that the macro policies in the later stage will continue to increase in the direction of steady growth, in which the rhythm of tax rebate, tax reduction and fee reduction will be significantly accelerated. The "big move" of interest rate and reserve requirement reduction in monetary policy is expected to continue to be implemented in the second quarter, and even the possibility of being launched in April is not ruled out.
