Caixin Manufacturing PMI rose to 50.6 in October, returning to expansion range
The Caixin China Manufacturing PMI for October 2021 announced on November 1st recorded 50.6, an increase of 0.6 percentage points from September, returning to the expansion range. The increase in the PMI index is mainly due to the improvement in demand, especially driven by the strengthening of domestic demand.
From the perspective of Caixin China’s manufacturing PMI, manufacturing operations in October showed strong demand and weak supply. The new orders index rose in the expansion range in October, rising to a four-month high. However, weak production directly affects enterprises’ reduction in employment. The manufacturing employment index in October was in the contraction range for the third consecutive month, but it was only slightly below the prosperity and decline line, and the contraction rate was slower than that in September.
In October, the manufacturing purchase price index rose sharply to the highest point since 2017, and has been in the expansion range for 17 consecutive months, showing that raw material prices, energy prices, and freight rates have all increased the cost of manufacturing companies. Electricity curtailment and shortage of raw materials have adversely affected logistics, and the supplier supply time index in October recorded a new low since April 2020. Affected by multiple factors such as strong demand, weak supply, power curtailment, shortage of raw materials, rising prices, and logistics interruptions, the procurement volume index and raw material inventory index in October hit new lows since March and April 2020, respectively.
However, for the production prospects in the next year, surveyed companies generally hold growth expectations, and the output expectation index was much higher than the rise and fall line in October.
According to Wang Zhe, senior economist at Caixin Think Tank, the manufacturing boom rebounded in October, but downward pressure on the economy still exists. The impact of the improvement of the epidemic on the manufacturing industry has weakened, domestic demand has been boosted, and supply constraints have become the primary factor affecting economic operations. At the policy level, it is necessary to take effective measures to ensure the supply and price stability of bulk commodities, but also to focus on the survival of downstream enterprises, especially small and medium-sized enterprises.
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