Wang Han et al.: The production side of the manufacturing industry shows a trend of volume increase and price reduction

　　Zhongxin Jingwei December 1 Title: The manufacturing production side shows a trend of volume increase and price reduction

　　The author is Han Wang, Managing Director and Chief Economist of Industrial Securities

　　Lu Yanjin Senior Macroeconomic Analyst of Industrial Securities

　　Wang Xiaoxiao Is a macroeconomic analyst at Industrial Securities

　　Data released by the National Bureau of Statistics showed that the manufacturing PMI (China Manufacturing Purchasing Managers' Index) was 50.1% in November, up 0.9 percentage points from the previous month and back to the expansion range; the non-manufacturing PMI was 52.3%, down slightly by 0.1 percentage points from the previous month.

　　The effect of ensuring supply and stabilizing prices has emerged, and the price increase of manufacturing production has decreased. In November, the manufacturing PMI rebounded back into expansionary territory after two consecutive months below the critical value. Among the five major sub-items, the production index rebounded by 3.6 percentage points from the previous month, the raw material inventory index and the new order index rose by 0.7 and 0.6 percentage points respectively, the employee index rose slightly by 0.1 percentage points, and the supplier delivery time index rose by 1.5 percentage points. Overall, the sharp recovery in production in November is the biggest source of power for the recovery of manufacturing PMI, the inventory of finished products and raw materials of enterprises has rebounded, and the inventory of finished products has rebounded even more, and the purchase and ex-factory prices have both dropped sharply, reflecting the recent introduction of a series of policies to ensure supply and stabilize prices, and the manufacturing production side has shown significant improvements, showing a trend of volume increase and price reduction.

　　On the supply and demand side, production has improved significantly, demand has rebounded but is still weak, and external demand has improved more than domestic demand. From September to October, the production index was in a contraction range for two consecutive months, and in November, the production index improved sharply by 3.6 percentage points, returning to the expansion range, supporting the significant improvement of the PMI index. In November, the new order index rose by 0.6 percentage points, and the new export order index rose by 1.9 percentage points, but the two major order indexes were still in the contraction range, and the improvement in external demand was greater than that of domestic demand, so although the demand side improved, it was still weak. Overall, production improvements in November outweighed demand, and the gap between supply and demand is converging.

　　In terms of prices, both the raw material purchase price index and the ex-factory price index have dropped sharply, and the price pressure has eased. In November, the introduction of the policy measures to ensure supply and stabilize prices had two levels of impact on prices: one is that the recovery of production under the supply guarantee measures has narrowed the gap between supply and demand, forming a pull-down force for prices; second, the price stabilization measures have increased, and the commodity prices represented by coal have obviously retraced. Affected by the above, the raw material purchase price index and the factory price index fell by 19.2 and 12.2 percentage points respectively in November, and the raw material purchase price index fell even more, the gap between the purchase and ex-factory prices converged, and the price squeeze faced by enterprises improved.

　　At the inventory level, the inventory improvement of finished products is greater than that of raw material inventory, which also reflects the logic of production improvement. On the one hand, under the influence of production improvement and purchase price decline, enterprises supplement raw materials, so that raw material inventories improve; on the other hand, when production improves significantly, the demand improvement is weaker than the production improvement range, making the finished product inventory replenishment greater.

　　At the level of external demand, the support of subsequent price factors on exports may weaken.

　　The current PMI index reflects that the impact of supply and price stability has emerged, production pressure has eased, supply has recovered, and price pressure has declined. It should be noted that the new order index is still below the critical value despite improvement, and is mainly supported by the improvement of new export orders, coupled with the non-manufacturing business activity index is also slightly lower than last month, reflecting that the recovery trend of domestic demand is still not strong. Coupled with the recent recurrence of local epidemics, or still restricting the recovery of residents' income expectations and consumption willingness, it is necessary to remain vigilant against the continuity of domestic demand constraints. (Zhongxin Jingwei APP)

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