In December, the manufacturing PMI was announced, which is still below the 50% boom and bust line, indicating that China's manufacturing industry as a whole is still shrinking.
PMI is a month-on-month data, which is a diffusion index, and above 50%, it means that the economy is in an expansion zone;Otherwise, it is a contraction range. As far as China's manufacturing PMI is concerned, it has entered the contraction range since April 2023, and it is below 50% in all months except September.
To put it simply, the manufacturing PMI continues to be below 50%, which is not as good as a month.
The manufacturing PMI is calculated by weighting five diffusion indices (sub-indexes), namely the new orders index, with a weight of 30%;Production index, with a weight of 25%;Employment index, with a weight of 20%;*Merchant delivery time index, weighted at 15%;Raw material inventory index with a weight of 10%. Among them, the ** business delivery time index is an inverse index, and the reverse calculation is carried out when synthesizing the manufacturing PMI index, because the shorter the business delivery time, the weaker the demand, the less the consumption of capacity, the higher the index, the lower the economic prosperity.
From the perspective of the five sub-indexes, the production index and the first-class merchant delivery time index are higher than the critical point, and the new orders index, raw material inventory index and employment index are lower than the critical point. **The merchant delivery time index is an inverse index, so among the five sub-indexes, only the production index is in the expansion range, and the other indices are all signals of contraction.
Judging from the December data, orders are declining and production is expanding.
The new orders index was 487%, down 07 percentage points, indicating that the demand in the manufacturing market has declined;The production index is 502%, down 05 percentage points, still higher than the critical point, indicating that manufacturing production continues to expand.
This phenomenon shows that enterprises have good expectations for the future, although there are no orders, they are still willing to produce in advance in case of emergency, which should be related to the approaching Spring Festival and the production enterprises to stock up in advance.
Some people may worry that this will not increase the pressure on inventories
From the perspective of the finished goods inventory index, it has continued to be in the contraction range since March 2023 and is in the stage of destocking. This suggests that business inventories are not increasing.
How should we view the downturn in China's manufacturing PMI?Let's look at it on a global scale.
At present, the global manufacturing PMI is in a contraction cycle, not to mention the euro area, which has been in the contraction range since July 2022.
The global manufacturing cycle is in a downward phase, and in contrast, the contraction of China's manufacturing PMI is still better.
The manufacturing industry represents supply, and behind the contraction of supply is that supply is greater than demand, forcing supply to contract.
This problem can be divided into two angles, one is that the demand is too low, and there is an oversupply;One angle is that supply is expanding too fast and demand can't keep up. Different angles correspond to different solutions to the problem, the former should stimulate demand, and the latter should shrink supply.
At this stage, the latter is the main reason. After the end of the global pandemic, all countries have made efforts to localize the manufacturing industry, especially the United States, which has vigorously promoted the return of the manufacturing industry, and under the financial subsidies, the construction expenditure of the manufacturing industry has doubled since 2021, far exceeding the historical normal level.
Manufacturing capacity is globally competitive. Even if China intends to reduce production capacity, as long as the United States increases its investment in production capacity, it will still cause overcapacity around the world.
In this sense, the problem of PMI in China's manufacturing industry is not only a domestic problem, but a reflection of global problems in China. On a global scale, as long as there are countries that are vigorously expanding manufacturing capacity at any cost, it is difficult to fundamentally alleviate the problems faced by the global manufacturing industry.
In the context of anti-globalization, Europe and the United States and other countries to support the domestic manufacturing industry is not only based on economic purposes, but also based on political purposes, with the so-called "security" demand blessing, in the next few years, the global expansion of manufacturing capacity is a trend, and the overcapacity of the global manufacturing industry is difficult to avoid.
If I don't expand, others will expand, and other people's expansion can affect me as well. So, is it still necessary for me to actively refrain from expanding?
The solution is not to actively compress, but to enhance competitiveness and promote the upgrading of the manufacturing structure. I'm stronger than you, the cost is lower than yours, everyone expands, see who can roll whom.
This is the idea of solving the problem, you live or die.
Note: The market is risky, and investment should be cautious. In any case, the information or opinions expressed herein are for an exchange of views only and do not constitute investment advice to any person. 】
This article was originally written by *** Xue Hongyan Whispering, the author is Xue Hongyan, vice president of Xingtu Financial Research Institute