Hongta Securities Li Qilin Yang Xin
03-01 15:42
Hongta Securities pointed out that the obvious improvement of PMI is due to the following four points. First, the resumption of work and production after the holiday promotes the obvious recovery of the supply side of the manufacturing industry; second, the continuous recovery of the demand side; third, the improvement of business operations and increased confidence; The index rebounded.
Driven by the optimization of epidemic prevention and control and the efforts of various regions to fight the economy, the manufacturing PMI in February ushered in a strong rebound, reaching 52.6%, an increase of 2.5 percentage points from the previous month. The sub-indices such as demand, production, and confidence were all significant. pick up.
From the sub-item data, there are four main reasons for the sharp improvement in the PMI in February:
1. The resumption of work and production after the festival promotes the obvious recovery of the supply side of the manufacturing industry
On the supply side, production, procurement, raw material inventory, employees, and supplier delivery time indexes increased by 6.9, 3.1, 0.2, 2.5, and 4.4 percentage points month-on-month, respectively, indicating that as residents return to work after the holiday, the flow of people and logistics resumes, and labor supply constraints Significant improvement, enterprises are speeding up the resumption of work and production. According to the century-old construction survey, as of the second day of the second lunar month (February 21), the national labor service delivery rate was 83.9%, an increase of 2.8% over the same period in the lunar calendar; the resumption rate was 86.1%, an increase of 5.7% over the same period in the lunar calendar.
In addition, the rapid and significant recovery of the supply side once again reflects the resilience of my country’s manufacturing industry chain and supply chain, laying a good foundation for subsequent economic recovery.
2. Continuous repair on the demand side
The new orders, orders in hand, imports, and new export orders of the manufacturing industry increased by 3.2, 4.8, 4.6, and 6.3 percentage points from the previous month to 54.1%, 49.3%, 51.3%, and 52.4% respectively; the PMI index of the service industry rose by 1.6 percentage points to 55.6%; the construction PMI index increased by 3.8 percentage points to 60.2%.
In terms of subdivided industries, the new order index of wood processing and furniture manufacturing, metal products, electrical machinery equipment and other industries all rose to a high level of above 60.0%. The PMIs of equipment manufacturing, high-tech manufacturing, high energy-consuming industries and consumer goods industries were 54.5%, 53.6%, 51.6% and 51.3% respectively, 3.8, 1.1, 3.0 and 0.4 percentage points higher than the previous month.
The repair on the demand side mainly comes from the following four points:
First, the recovery of residents’ consumption drives the restoration of related industries.As the impact of the epidemic recedes, the living radius of residents has expanded, and consumption behavior has increased, driving the recovery of related manufacturing industries.
Second, infrastructure investment continues to support related industries.Benefiting from last year’s policy-based development financial instruments and this year’s large-scale pre-issue of special bonds to stimulate social funds, as well as the active promotion of local governments under the pressure of steady growth, infrastructure investment has maintained a high degree of activity. At the beginning of the year Since then, the construction of major projects has been concentrated in many places, which has driven the rapid recovery of demand in the raw material industry and equipment manufacturing industry in the upper and middle reaches of the industrial chain.
The third is that the recovery of real estate will drive the post-real estate cycle and the recovery of the raw material industry.Stimulated by low loan interest rates and loose housing purchase policies, housing sales in many places picked up. In February, the average sales area of commercial housing in 30 large and medium-sized cities increased by 37.3% month-on-month and 26.0% year-on-year. Housing prices also showed positive signs. The average price of newly-built residential buildings in 100 cities across the country remained flat month-on-month, stopping the “seven consecutive declines” trend. At the same time, real estate construction accelerated with the recovery of employee attendance rate and the policy of guaranteed delivery of buildings. On February 21, the resumption rate of housing construction has reached 84.1%.
The fourth is to alleviate supply chain disturbances and enhance the ability of export enterprises to receive orders.We believe that the rebound in new export orders in the manufacturing PMI this month is mainly due to the significant restoration of export companies’ ability to receive orders and production capacity after the supply-side constraints were eased. In other respects, factors such as the government’s foreign trade policies such as leading a team to go abroad to “grab orders” and the strong competitiveness of domestic enterprises in advantageous industries are also good for exports.
However, in the long run, the probability of external demand is still downward. Judging from recent data such as high prices and low unemployment in the United States, the level of inflation in the United States is still relatively high, and economic resilience still exists. Furthermore, the production and sales of enterprises, as well as the income and consumption of residents may be dragged down by long-term high interest rates. At the same time, the spillover impact of US interest rate hikes on Europe and other countries will continue, and the contraction of global trade volume will be a major trend. As a major trading country whose export share accounts for 14.7% of the international market, China cannot stand alone.
3. The business operation improves and the confidence increases
With the active restoration of the market environment after the epidemic, and the continuous efforts of policies such as tax cuts and fee reductions, and assistance to companies to bail out, the operating environment of enterprises has improved significantly, and market vitality has increased significantly. The PMIs of large, medium and small enterprises were 53.7%, 52.0% and 51.2% respectively. The improvement of small and medium-sized enterprises, which were greatly disturbed by the epidemic, was more obvious, with a month-on-month increase of 3.4 and 4.0 percentage points respectively. After falling below the line, it returned to the expansion zone.
At the same time, the confidence of enterprises in future operations has also increased significantly. Manufacturing production and business activity expectation index was 57.5%, 1.9 percentage points higher than last month, and rose to a high point in the past 12 months. Among them, medium-sized enterprises and small-sized enterprises rose to 55.3% and 58.8% respectively.
In terms of subdivided industries, the production and operation activity expectation indexes of 10 industries including agricultural and sideline food processing, textiles, general equipment, special equipment, and automobiles are all in the high-level boom range above 60.0%.
4. The recovery of supply and demand drives the price index to rise
The purchase price index of main raw materials was 54.4%, 2.2 percentage points higher than that of the previous month. From a micro perspective, the steel and downstream industries related to housing construction and infrastructure have increased significantly. The purchase price index of major raw materials in industries such as ferrous metal smelting and rolling processing, general equipment, and special equipment are all higher than 60.0%.
The ex-factory price index was 51.2%, 2.5 percentage points higher than that of the previous month, and returned to the expansion range for the first time since April last year. With the recovery of the economy, the improvement of terminal demand has promoted the improvement of downstream manufacturing profits.
Finally, make a summary:
1. The sharp increase in PMI in February reflects the relatively high recovery slope of the economy after the year. The rapid restoration of the supply side demonstrates the resilience of my country’s manufacturing industry chain and supply chain, laying a good foundation for further economic restoration.
2. On the one hand, demand-side recovery is the active recovery of the economy driven by the weakening of the impact of the epidemic, and on the other hand, it is the recovery of important industries driven by the policy of stabilizing growth. Infrastructure investment is still an important starting point for expanding effective investment in 2023, and its supporting role in economic recovery will continue to emerge. There are signs of recovery on the demand side of real estate, and guaranteed delivery buildings are also continuing to advance.
3. Under the joint effect of the easing of supply-side constraints, efforts to stabilize foreign trade policies, and the improvement of competitiveness of advantageous industries, the index of new export orders has rebounded to an expansion range. However, in the long run, we believe that the reduction in global trade volume is a trend. my country’s exports The decline in growth rate is inevitable.
4. Although the PMI recovered significantly in February, and a virtuous circle of demand, production, and confidence stabilization is being established, considering factors such as the downward pressure on foreign trade, the difficulty of collecting money from sales by real estate companies, and the need to allow sufficient time for the repair of the balance sheets of various entities, the macroeconomic Economic policies still need to work hard to consolidate the existing recovery results.
The author of this article: Li Qilin and Yang Xin of Hongta Securities, the source of this article: Qilin Macro, the original title: “Four Reasons for the Significant Improvement of PMI in February”
Li Qilin’s practicing certificate number S1200520110002
Yang Xin Practicing certificate number S1200522090001
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