Event:
In March 2022, the official manufacturing PMI recorded 49.5%, down from -0.7 PCTs last month; Non manufacturing PMI recorded 48.4%, down from - 3.2pcts last month, including construction PMI 58.2% 1%, compared with the previous month, + 0.5pcts, pmi46.5% in the service industry 7%, compared with the previous month -3.8pcts; The comprehensive PMI output index was 48.8%, down from - 2.4pcts last month.
Core view:
The new order index and production index fell at the same time, which weakened the manufacturing PMI in March and fell below the boom and bust line for the first time in five months: the official manufacturing PMI recorded 49.5% in March 2022, down from -0.7pcts last month, and was below the boom and bust line for the first time since November last year. Seasonally, the manufacturing PMI in March this year was the lowest in the same period in history, and significantly deviated from the month on month downward trend in February and the month on month upward trend in March over the years, indicating that there was a super seasonal downward trend in the prosperity of the manufacturing industry in March. Structurally, the PMI new order index and production index fell at the same time, which was the main drag on the decline of official manufacturing PMI this month. In terms of large and medium-sized enterprises, the manufacturing PMI of large and medium-sized enterprises decreased compared with the previous month, and the manufacturing PMI of small and medium-sized enterprises increased compared with the previous month. However, based on the boom and bust line, among large, medium and small enterprises, only the PMI of large enterprises is higher than the boom and bust line, indicating that the prosperity of large enterprises is still higher than that of small and medium-sized enterprises.
Affected by the epidemic and the conflict between Russia and Ukraine, domestic and foreign demand weakened at the same time, and production was also restrained: the PMI new order index and production index weakened significantly in March, indicating a short-term decline in industrial demand and production. In March, the PMI new order index and production index recorded 48.8% and 49.5% respectively, both of which were below the boom and bust line for the first time since records. The trend was significantly deviated from the upward trend in March compared with February in the same period in history (except that the PMI new order index in March 2015 was downward compared with February). In March, the outbreak of the epidemic in China and the continuation of the overseas conflict between Russia and Ukraine were the main reasons for the simultaneous weakening of industrial production and demand. The Bureau of Statistics said that some enterprises in some areas temporarily reduced production and stopped production, which affected the normal production and operation of relevant upstream and downstream enterprises, and restrained the demand and production of industrial enterprises. Overseas, under the conflict between Russia and Ukraine, the Bureau of Statistics said that some export orders of enterprises were reduced or cancelled, and foreign demand was also impacted. In March, the PMI new export order index ended the upward trend for two consecutive months, recording 47.2%, down from - 1.8pcts last month. At present, the epidemic situation in China is still deteriorating, the conflict between Russia and Ukraine is easing, but there is still uncertainty, and the potential disturbance factors faced by foreign demand in the short term are still not small.
The supply-demand structure deteriorated and the manufacturing industry passively replenished inventory: in March, the value of PMI new orders - PMI finished product inventory was -0.1pcts, which was negative for the first time since February 2020, reflecting the obvious deterioration of the supply-demand structure. The inventory of raw materials and finished products decreased significantly due to the decline of the expected inventory of raw materials and finished products, but the inventory of raw materials and finished products decreased significantly due to the decline of the expected inventory of raw materials and finished products.
The PMI ex factory price index and the purchase price index of main raw materials went up. It is expected that the PPI in March will go up month on month and down year on year: the PMI ex factory price index and the purchase price index of main raw materials in March were 56.7% and 66.1% respectively, up for two consecutive months compared with + 2.6pcts and + 6.1pcts last month. PMI ex factory price index - the purchase price index of PMI's main raw materials fell to -9.4pcts from -5.9pcts last month, and the middle and lower reaches of manufacturing enterprises may continue to be under pressure in the short term. Since March, oil and coal prices have risen, steel prices have been relatively stable, CRB spot index and Nanhua industrial products index have also shown an upward trend, and PPI is expected to be about + 1% month on month in March. On the whole, although the upward movement of oil and coal prices will slow down the downward speed of PPI, it is expected that the PPI in March will be about + 8.0% year-on-year under the action of tail raising factors, which is still lower than that in February.
The service industry is greatly impacted by the epidemic, and the outlook of the construction industry is still upward: in March 2022, pmi48.5% of non manufacturing industry 4%, up from -3.2pcts last month. Among them, the construction industry pmi58 1%, compared with the previous month, + 0.5pcts, pmi46.5% in the service industry 7%, up from -3.8pcts last month. In March, the PMI of the service industry decreased significantly, which was due to the significant impact of the epidemic and the obvious decline of prosperity. The upward trend of construction PMI in March is the highlight of this month's PMI data, which is mutually confirmed with the upward trend of cement price index and steel comprehensive price index in March compared with February, indicating that steady growth continues to exert force. Considering the high growth rate of fiscal deposits from January to February, the growth rate of fiscal expenditure from March to April may continue to increase on the basis of + 6.98% in the first two months (higher than + 0.3% in December last year), superimposed with the effective connection of a large number of special bonds issued at the end of last year and the beginning of this year, the growth rate of infrastructure in the first half of the year is expected to continue to rise, which will drive the continuous rise of the outlook of the construction industry.
Subsequent judgment: the weakening of industrial production reflects the increasing downward pressure on China's economy, and the policy will provide hedging. Overall, the PMI data reflects that the downward pressure on the economy increases in the short term, while the inflationary pressure increases, that is, the quasi stagflation pattern, which is a negative factor for the stock market. The executive meeting of the State Council held on March 29 proposed to put steady growth in a more prominent position and formulate plans to deal with greater uncertainty, indicating that the government will further strengthen the combination of steady growth policies to hedge the downward pressure on the economy. In terms of fiscal policy, the national Standing Committee proposed to pay close attention to issuing the amount of remaining special bonds, favor regions with strong solvency and sufficient reserves for projects, reasonably expand the scope of use of special bonds, speed up the commencement and construction of projects, and form physical workload as soon as possible. In terms of monetary policy, compared with the regular meeting in the fourth quarter, the regular meeting of the central bank in the first quarter adjusted "increasing the combination of cross cyclical regulation and counter cyclical regulation" to "strengthening cross cyclical regulation and counter cyclical regulation", and "prudent monetary policy should be flexible and appropriate" to "increasing the implementation of stable monetary policy", releasing a more positive and stable growth attitude, and the subsequent reduction of reserve requirements and interest rates is still expected. However, as the Federal Reserve is driving the rapid tightening of external liquidity, the interest rate spread of China US 10-year Treasury bonds has narrowed to a low level near 40bp, and China is expected to have limited room for further easing. In terms of industrial policy, the adjustment of real estate policy or the subsequent important driving force point is inseparable from the stable growth of real estate. Although many places have relaxed the real estate regulation and control policy due to the implementation of urban policies, the acquisition of land by residents and real estate enterprises since March is still significantly weaker than that in the same period last year. It is expected that the subsequent real estate regulation is expected to further liberalize the policy restrictions on the demand side (residents' house purchase) and the supply side (real estate enterprise financing).
