The economic cycle bottomed out, manufacturing and non manufacturing industries further contracted, and the comprehensive PMI fell. In April, manufacturing PMI decreased by 2.1 percentage points to 47.4% month on month, which is consistent with Bloomberg market expectation (47.3%). In April, the business activity index of construction industry (52.7%) decreased by 5.4 percentage points and the business activity index of service industry (40.0%) decreased by 6.7 percentage points. Under the influence of both, the PMI of non manufacturing industry decreased by 6.5 percentage points to 41.9% compared with the previous period, lower than the Bloomberg market expectation (46.0%). The rebound of the epidemic combined with the double impact of blocked supply chain, the comprehensive PMI decreased from 48.8% in the early stage to 42.7% in April. In April, after contracting for two consecutive months, manufacturing PMI, non manufacturing PMI and comprehensive PMI all fell to the lowest value since March 2020, and the bottom trend of the economic cycle was obvious.
Take the initiative to achieve dual goals. On April 29, the Political Bureau meeting of the CPC Central Committee stressed the view that "the epidemic should be prevented and the economy should be stabilized". We believe that this will help balance the current dual goals of "dynamic zeroing" and economic development. With the further easing of the pressure on the supply chain, we expect the manufacturing and construction industries to gradually recover from the supply shock, and the improvement in demand brought by the boost of domestic demand will be the driving force for the accelerated expansion of the manufacturing and construction industries; The service industry will still be dragged down by the epidemic, but there is limited room to continue to decline.
Demand fell further, and the pressure on the manufacturing industry to passively replenish inventory increased. In April, the manufacturing new order index fell 6.2 percentage points to 42.6%, the lowest since March 2020, indicating that the manufacturing demand fell further. In terms of external demand, the recovery of overseas production gradually replaced China's export orders, and the new export order index of the manufacturing industry continued to decline, from 47.2% in the previous period to 41.6% in April. Under the background of weak overall demand, the inventory index of raw materials and finished products in the manufacturing industry showed differentiation: in April, the inventory index of raw materials decreased by 0.8 percentage points to 46.5%, and the inventory index of finished products rebounded by 1.4 percentage points to 50.3%. The continued division of the inventory index of raw materials and finished products reflects that the weak demand led to the slowdown of de inventory and the pressure of passive inventory replenishment in the manufacturing industry increased.
Manufacturing inventory pressure pulled down production, superimposed the impact of supply chain obstruction, and procurement and import fell further. In April, the difference between finished goods inventory and new order index expanded to 7.7 percentage points from 0.1 percentage points in the previous period, indicating the rising inventory pressure of the manufacturing industry. Manufacturing production continued to weaken due to inventory pressure, and the production index fell from 49.5% in the previous period to 44.4% in April, the lowest since March 2020. In April, the negative impact of epidemic prevention and control on the supply chain increased, and the distribution time index of manufacturing suppliers decreased to 37.2%, only slightly higher than 32.1% in February 2020. Under the dual influence of weak production and blocked supply chain, in April, the manufacturing procurement volume index (43.5%) and import index (42.9%) decreased by 5.2 and 4.0 percentage points respectively compared with the previous period.
The recovery of manufacturing enterprises of different sizes was suspended, and the PMI of large enterprises contracted for the first time since March 2020. In April, the PMI of large enterprises decreased by 3.2 percentage points to 48.1%, falling below the boom and bust line for the first time since March 2020. In April, the PMI of medium-sized enterprises (47.5%) and small enterprises (45.6%) decreased by 1.0 percentage points. The recovery of enterprises of different sizes has been delayed, which is affected to varying degrees at both ends of supply and demand. According to the change range of the new order index in April, the impact of the demand side on large enterprises is more obvious: large enterprises (- 7.3 percentage points), medium-sized enterprises (- 5.6 percentage points) and small enterprises (- 4.7 percentage points); According to the change range of supplier delivery time index in April, the impact of the supply side on small enterprises is more obvious: large enterprises (- 8.8 percentage points), medium-sized enterprises (- 9.5 percentage points) and small enterprises (- 10.3 percentage points).
Stabilize expectations and pay attention to the improvement of supply and demand. In April, the expected indexes of construction industry (57.0%), manufacturing industry (53.3%) and service industry (53.0%) were still on the rise and fall line, but decreased by 3.3, 2.4 and 0.6 percentage points respectively compared with the previous period. In April, the decline of the expected index of the service industry has narrowed significantly (the decline in March was 6.0 percentage points). We expect that under the condition of effective and stable control of the epidemic, the space for the service industry to continue to shrink is limited. In April, the business activity index of the construction industry (52.7%) decreased by 5.4 percentage points, which was mainly dragged down by the new order index of the construction industry (45.3%) and the employee index of the construction industry (43.1%). We expect that the expansion trend of the construction industry will accelerate with the marginal increase of fiscal expenditure. For the manufacturing industry, we believe that after the gradual recovery of the supply chain, the further expansion of the manufacturing industry will depend on the improvement of demand. Unlike the export driven in 2021, the growth power of the manufacturing industry in 2022 will depend more on domestic demand.
