Manufacturing PMI fell significantly. In February 2022, the official manufacturing PMI was 49.5%, down 0.7 percentage points from the previous value. It returned below the boom and bust line for the first time after October last year, reflecting the decline of the overall prosperity level of the manufacturing industry. The main sub indexes were lower than last month.
Weaker than seasonality. Historically, due to the impact of the resumption of work after the Spring Festival, most of the PMI in March showed a month on month rise, without exception in the past five years. After excluding the abnormal value in 2020, the average PMI in March 20172021 increased by 1 percentage point month on month.
Supply and demand are weak. The production index and new order index were 49.5% and 48.8% respectively, down 0.9 and 1.9 percentage points from the previous month, both falling to the contraction range, while the decline in demand was larger and the performance was relatively weaker. New export orders fell by 1.8 percentage points to 47.2% month on month. According to the explanation of the Bureau of statistics, the recent intensification of international geopolitical conflicts and the reduction or cancellation of export orders of some enterprises may weaken foreign demand.
The upstream price is still high and the cost pressure remains. In March, the sharp rise in energy prices caused by geopolitical influence began to appear. The purchase price index and ex factory price index of main raw materials were 66.1% and 56.7% respectively, 6.1 and 2.6 percentage points higher than that of the previous month, both rising to the highest point in nearly five months. The difference between the purchase price index and the ex factory price index expanded for three consecutive months, rising to 9.4% in March. The upstream price rise may significantly squeeze the profits of the middle and lower reaches. In terms of industry, in March, the purchase price index and ex factory price index of main raw materials in upstream industries such as petroleum, coal and other fuel processing, ferrous metal smelting and rolling processing, nonferrous metal smelting and rolling processing exceeded 70.0%, bringing great cost pressure to the middle and downstream industries.
PMI of non manufacturing industry dropped significantly, with the highlight in the construction industry. In March, the PMI of non manufacturing industry was 48.4%, down 3.2 percentage points from the previous month. The prosperity level of non manufacturing industry decreased and the overall business activities of enterprises slowed down. Among them, with the warming climate, the construction progress of the construction industry has accelerated, and the PMI index of the construction industry has rebounded by 0.5 percentage points to 58.1%. The prosperity is at a high level, pointing to steady growth and gradually developing; The PMI index of the service industry fell by 3.8 percentage points to 46.7% compared with the previous month. Among them, contact aggregation industries such as railway transportation, air transportation, accommodation and catering are greatly affected by the epidemic. In the short term, the epidemic may still be the most important factor disturbing the service industry.
Overall, the main PMI indexes fell below the critical point in March, indicating that the overall prosperity level of China's economy has declined. The leading index of new orders finished goods inventory fell into the negative range for the first time since the outbreak of the epidemic in 2020. The PMI differentiation of different types of enterprises is still obvious, and small enterprises are facing great pressure. Although the economic data from January to February performed well, under the disturbance of multiple factors such as the epidemic and geopolitics, the economic data in March may fall, and the downward pressure on the economy remains. Judging from the statements of this week's national standing committee meeting and the first quarter regular meeting of the central bank, they have released certain positive signals. We should "stick to the annual development goals, put steady growth in a more prominent position" and "the policy of stabilizing the economy should come out early and quickly". April may become an important policy window.
