Core view:
On April 30, the National Bureau of statistics released that the PMI in April was 47.4, significantly lower than that in March. In fact, if the distortions caused by statistical methods are excluded, the PMI index may be worse - which can more accurately reflect the actual operation of the manufacturing industry in April. The disturbance of the epidemic is the main reason for the sharp decline of China's manufacturing industry and even the overall economy in April. However, considering that the inflection point of the epidemic has appeared and the resumption of work in Shanghai has begun, we believe that the most difficult time for China's economy may be over.
Key investment points:
Supplier delivery time sub index distorts manufacturing PMI readings
Although the PMI in April has decreased significantly compared with that in March, this data may still overestimate the actual situation of the manufacturing industry. This is because the PMI supplier delivery time sub index fell sharply in April. In normal times, this is a manifestation of strong demand and tight supply, which can improve PMI. However, this phenomenon is mainly due to the impact of epidemic prevention and control on the supply chain, which has nothing to do with the high economic boom. If the contribution of this sub index is excluded, the PMI composite index will decline significantly - we think this reflects the real situation of the current operation of the manufacturing industry. In fact, the decline of PMI sub indexes such as new orders, production, import and new export orders significantly exceeded the PMI composite index.
The epidemic has had a significant impact on the manufacturing industry and even the overall economy
The significant decline experienced by the manufacturing sector and even the overall economy in April is undoubtedly related to a series of double contraction of demand and supply caused by the spread of the epidemic and the upgrading of epidemic prevention measures. This decline has also been verified by the obvious weakening of a large number of high-frequency data since April, including the transaction area of commercial houses in 30 cities, the national vehicle freight volume, the throughput index of major express centers in China, etc.
The economy may have bottomed out
As China's new cases have reached the peak, especially Shanghai has begun to return to work and production after the epidemic is gradually controlled, and at present, the epidemic spillover in Beijing and other places is still controllable, and the superposition of macroeconomic policies is making continuous efforts to "steady growth", we tend to think that China's economy is going through the worst time. Considering that PMI is a month on month index and the base in April is low, we expect that PMI may rebound significantly in May, or even more than 50.
Risk tip: the economy is less than expected, the policy is less than expected, and the epidemic deterioration outside China is more than expected