[Epoch Times, February 1, 2022](The Epoch Times reporter Liu Yi comprehensive report) The official China Manufacturing Purchasing Managers Index (PMI) and Caixin PMI both fell in January, with the Caixin PMI falling to 50. Below the line of prosperity and decline, the lowest since March 2020. A number of industry sources said that the demand in the mainland is weak and slow, and the economy is under great downward pressure.
The National Bureau of Statistics of China and the Federation of Logistics and Purchasing (CFLP) jointly announced on January 30 that the official manufacturing PMI fell to 50.1 in January from 50.3 in the previous month.
On the same day, Caixin/Markit also jointly released the Caixin PMI index for January, which fell to 49.1, the lowest level since February 2020. The index also rose to 50.9 last month and hit a second-half high.
Official manufacturing PMI hits five-month low
Among the official manufacturing PMIs, the PMI of large enterprises was 51.6, an increase of 0.3 percentage points from the previous month; the PMI of medium-sized enterprises was 50.5, a decrease of 0.8 percentage points from the previous month; the PMI of small enterprises was 46.0, a decrease of 0.5 percentage points from the previous month.
From the perspective of sub-indices, among the five sub-indices that constitute the manufacturing PMI, the production index is higher than the critical point of 50, and the new order index, raw material inventory index, employment index and supplier delivery time index are all below the critical point of 50. .
The data also showed that the non-manufacturing business activity index in January was 51.1, down 1.6 percentage points from the previous month and hitting a five-month low. Among them, the business activity index of the construction industry was 55.4, a decrease of 0.9 percentage points from the previous month; the business activity index of the service industry was 50.3, a decrease of 1.7 percentage points from the previous month and the lowest level in five months.
Industry data show that the business activity indices of accommodation, catering, sports and entertainment, and transportation-related industries all dropped significantly from the previous month.
Caixin PMI hits lowest since March 2020
According to a report by Caixin on January 30, Caixin’s PMI of 49.1 in January fell 1.8 percentage points from the previous month, the lowest since March 2020.
Judging from the sub-indices of the Caixin Manufacturing PMI, the supply and demand of the manufacturing industry have weakened across the board.
The production index fell back into contractionary territory in January 2022, the lowest since September 2021.
On the demand side, the new orders index also fell to its lowest level since September 2021, falling into a period of contraction. Caixin cited weaker external demand as the main factor dragging down overall sales, with the new export orders index hitting a new low in the past 20 months.
Weaker supply and demand led to increased pressure on manufacturing employment. The employment index was at its lowest level since May 2020, staying in contractionary territory for the sixth consecutive month. Caixin believes that the reason why companies reduce employment is generally related to the reduction of scale and cost, and some companies report that it is difficult to recruit workers to fill vacancies.
In addition, the decline in market prosperity has prompted companies to reduce purchases and inventories. The purchase volume index, raw material inventory index, and finished product inventory index all fell to the contraction range; the backlog of work also declined, and the backlog index was in the contraction range for the first time in nearly 11 months . Affected by the epidemic prevention and control policy, the supplier supply time index further declined.
Industry Street Commentary: There is a lot of downward pressure on the weak economy in China
When interpreting the official PMI, Zhao Qinghe, a senior statistician at the Service Industry Survey Center of the National Bureau of Statistics, admitted that some manufacturing industries entered the traditional off-season of production in January, coupled with the recent slowdown in market demand, the expansion of manufacturing has weakened.
Reuters believes that China’s manufacturing industry, especially small and medium-sized enterprises, continued to increase operating pressure in January. At the same time, the frequent outbreak of the epidemic has led to a significant decline in related industries such as accommodation, catering, and entertainment, dragging down the official non-manufacturing PMI to a five-month low.
When explaining Caixin’s PMI, Wang Zhe, a senior economist at Caixin Think Tank, said that in January 2022, the manufacturing sector will weaken, supply will contract, demand, especially external demand will be under pressure, employment will continue to be sluggish, inflation pressure will ease, and the market will be optimistic. Sentiment remains at long-term averages. The downward pressure on the economy under “shrinking demand, supply shock, and weakening expectations” is further highlighted.
Reuters quoted Tang Jianwei, chief researcher of the Bank of Communications Financial Research Center, as saying that the Caixin PMI survey data includes more small and medium-sized enterprises in coastal areas, and can better see the trend of export orders. Its latest index shows a sharp decrease in the export order index, indicating that External demand may face slowing pressure in the first half of the year.
“For the past two years, external demand has been the main force supporting China’s economic growth. Now external demand has begun to soften, superimposed on the high base effect of last year, indicating that the downward pressure on the economy in the first half of this year may not be small.” He said.
Wen Tao of China Logistics Information Center also said that the proportion of enterprises that reflected insufficient market demand was 37.9%, although it was down 1.1 percentage points from the previous month. On the one hand, the lack of demand is due to factors such as the spread of the epidemic in the short term and the off-season of new kinetic energy industries. On the other hand, there is a trending slowdown in demand in the long run.
Zhang Zhiwei, chief economist at Baoyin Capital Management, said: “Weak demand has led to a slowdown in industrial activity, especially for small and medium-sized enterprises… The service industry has also been hit hard by the spread of the multi-city epidemic.”
Ma Hanping, a macro researcher at the Fixed Income Department of CITIC Securities, believes: “On the whole, the economy is in a complex state of traditional off-season, the impact of the epidemic and the expectation of stable growth, and the overall PMI is at a historically low level.” Under the guidance of counter-cyclical policies, the Chinese New Year Whether the actual production and operation of the enterprise can fulfill the current expectation of gradual improvement will become a key factor.
The difference between the official PMI and the Caixin PMI: Public information shows that the difference between the samples is the main difference between the official PMI and the Caixin PMI. The survey scope of the official PMI index includes 31 industry categories of the manufacturing industry in the “National Economic Industry Classification” and a survey sample of 3,000 companies. The Caixin China PMI survey sample is about 600 companies. Moreover, the sample of the official PMI includes large, medium and small enterprises, as well as large state-owned enterprises, and the coverage is wider. The sample of the Caixin PMI mainly focuses on small and medium enterprises.
Responsible editor: Li Muen#