Data Analysis: PMI Of China'S Manufacturing Industry Dropped To 48.1, And Market Confidence Weakened Significantly

Mainly affected by the rebound of health events and related epidemic prevention measures, China's manufacturing industry production and demand weakened in September, and the industry prosperity continued to decline in the contraction range.

The Caixin China Manufacturing Purchasing Managers Index (PMI) for September, released on September 30, recorded 48.1, down 1.4 percentage points from August, flat with may and the lowest in five months.

This trend is not consistent with the Bureau of statistics manufacturing PMI. The manufacturing PMI of September, released by the National Bureau of statistics, recorded 50.1 on the same day, up 0.7 percentage points, and was in the expansion range for the first time since the second half of 2022.

According to the sub data, both supply and demand of the manufacturing industry fell in September, of which the manufacturing production index fell below the boom and bust line for the first time since June, and the new order index was in the contraction range for two consecutive months, falling to the lowest in nearly five months. According to the survey enterprises, health incidents and epidemic prevention control restrict production arrangement, demand and supply chain, especially travel and operation constraints. Among the three categories of products, the output of investment products decreased the most significantly, while the sales of consumer goods decreased the most.

In terms of foreign demand, the overseas market's demand for China's manufacturing products accelerated to decline, while the health events continued to affect, resulting in September's new export order index continued to fall below the boom and bust line, recording a new low since June.

The weak supply and demand in the manufacturing industry has continued to worsen. Due to the weak market demand, enterprises reduced the number of employees accordingly, adding that some employees were difficult to return to work on time due to the control of health events. The manufacturing employment index fell in the contraction range in September, recording the lowest since May 2020.

Affected by the falling prices of steel and other raw materials, the purchasing price index of raw materials in the manufacturing industry remained below the critical point in September, falling to the lowest level since February 2016. In terms of classification, the cost burden of manufacturers of intermediate products and investment products is reduced, but the manufacturing cost of consumer goods is still rising slightly. In view of the decline in costs and the downturn in demand, enterprises generally reduced prices and promoted sales, driving the manufacturing industry's ex factory price index to a new low since 2016 in September.

In September, the overall performance of the manufacturing supply chain was still poor, and the delivery time of suppliers was slightly prolonged. Enterprises reported that the health events affected the supply and transportation of raw materials. At the same time, due to the limited market demand, the willingness of enterprises to purchase has decreased, and the original inventory has been increased. In September, the purchasing volume index and raw material inventory index of the manufacturing industry continued to decline below the boom and bust line.

Although the labor force has been reduced, with the decrease of new orders, the pressure on the production capacity of enterprises has been alleviated, and the backlog business volume has decreased slightly. The decrease in output and orders also led to a further decline in finished goods inventory, but some enterprises also reported that transportation difficulties and weak demand led to an increase in inventory.

Although manufacturing companies still expect to increase production in the coming year, optimism has fallen to the lowest level since December 2019 and is below the long-term average. On the other hand, it is expected that the demand of enterprises will continue to increase due to the increasing demand for products and equipment in the future.

Wang Zhe, a senior economist at Caixin, said that in the near future, adverse factors affecting economic development have increased and downward pressure on the economy has increased. Since August, the number of confirmed cases in key areas has increased significantly compared with that in key areas. At present, the main contradiction of economic operation lies in insufficient employment, weak demand and unstable expectation. The focus of policy implementation should be focused on promoting employment, granting subsidies, boosting demand, and cultivating the confidence of market participants by transmitting policy signals.