Restricted by factors such as insufficient market demand, the manufacturing PMI in June was below the boom and bust line for two consecutive months. Factors such as the fading of the May Day holiday effect and heavy rainfall in many places in the south led to a slowdown in the expansion of the service industry and the construction industry, and the non-manufacturing business activity index hit the lowest value of the year.
The manufacturing purchasing managers' index (PMI) released by the National Bureau of Statistics on June 30 was 49.5% in June, unchanged from the previous month; The non-manufacturing business activity index and the composite PMI output index were both 50.5%, down 0.6 and 0.5 percentage points respectively from the previous month.
Zhang Liqun, a special analyst of the China Federation of Logistics and Purchasing, said that the current is in the critical stage of promoting the overall economic recovery, and we must fully understand the seriousness of the market-guided demand contraction and its self-acceleration mechanism, significantly increase the counter-cyclical adjustment of macroeconomic policies, and significantly increase the role of government investment in pulling enterprise orders, drive the production and investment of enterprises to continue to be active, the employment situation continues to improve, and accelerate the demand contraction to demand expansion.
Wang Qing, chief macro analyst of Oriental Jincheng, analyzed that affected by the sluggish domestic demand and the marginal slowdown in external demand, the manufacturing PMI in June was in the contraction range for two consecutive months. At the same time, the prosperity of the construction industry and the service industry has also fallen to a low level. This shows that in the context of the continuous adjustment of the real estate industry, the current economic recovery is not yet solid, of which the lack of effective demand is the main contradiction, and the policy of stabilizing growth is expected to increase. The window for monetary policy cuts and RRR cuts in the third quarter is expected to open again, and the support policies for the property market will be further strengthened in the second half of the year.
The overall market demand is weak
Wang Qing believes that the contraction of market demand in June has intensified slightly, driving the production index to continue to decline, and the manufacturing PMI index has been at a low level. This shows that in the context of the continuous adjustment of the real estate industry, the foundation for economic recovery is still not solid, and the policy of stabilizing growth in the third quarter needs to be further strengthened.
From the perspective of the changes in the sub-index, the production side has increased steadily, the growth of new kinetic energy has accelerated, the vitality of micro subjects has improved, the pressure on raw material costs has fallen in the short term, and the overall economic operation is stable, but the problem of insufficient market demand needs further attention.
In June, the mainland's manufacturing production activities maintained a steady and increasing momentum, with the production index at 50.6 percent, a slight decrease of 0.2 percentage points from the previous month, but still remained in the expansion range. Wen Tao, an expert from China Logistics Information Center, said that the gradual implementation of various economic policies launched in the early stage has a good role in promoting the expansion of production by enterprises, and the order reception in some industries is better, which supports the overall production activities of the manufacturing industry.
On the demand side, the new orders index in June was 49.5%, a slight decrease of 0.1 percentage points from the previous month, and the new export orders index was 48.3%, unchanged from the previous month. Among them, the new orders index and new export orders index of high-energy-consuming industries were 45.9% and 47% respectively, both down about 1 percentage point from the previous month.
Wen Tao said that from the perspective of the change range of the new orders index and the new export index, the current overall market demand fluctuates little, but from the index level and corporate feedback, the market demand continues to be in a weak state. The proportion of manufacturing enterprises reflecting insufficient market demand was 62.4%, an increase of 1.8 percentage points from the previous month, indicating that manufacturing enterprises have a strong feeling of weak market demand. Various policies to expand domestic demand and stabilize foreign trade still need to continue to be promoted and accelerated, and efforts should be made to consolidate the momentum of economic recovery.
One of the more prominent positive changes in the June manufacturing PMI data is the acceleration of new momentum. According to Zhao Qinghe, a senior statistician at the Service Industry Survey Center of the National Bureau of Statistics, from the perspective of key industries, the PMI of high-tech manufacturing was 52.3 percent, up 1.6 percentage points from the previous month, and remained in the expansion range for eight consecutive months; the PMI of equipment manufacturing industry was 51.0 percent, up 0.3 percentage points from the previous month, and maintained expansion for four consecutive months. The transformation and upgrading of the mainland's manufacturing industry continued to advance, and the new quality productivity continued to develop and grow.
Wen Tao specifically mentioned that from the perspective of subdivided industries, the growth rate of railway, ship, aerospace transportation equipment manufacturing industry, electrical machinery and equipment manufacturing industry, and computer communication electronic equipment and instrumentation manufacturing industry is more prominent. In comparison, in June, the new kinetic energy accelerated growth under the condition that the manufacturing industry as a whole maintained a relatively stable operation, and the industrial structure continued to be optimized.
The price index has retreated
In terms of prices, affected by factors such as the recent decline in the prices of some bulk commodities and the lack of market demand, the purchase price index and ex-factory price index of major raw materials were 51.7% and 47.9% respectively, down 5.2 and 2.5 percentage points from the previous month. From the perspective of industries, the purchase price index and ex-factory price index of major raw materials in petroleum, coal and other fuel processing, ferrous metal smelting and rolling processing industries decreased significantly.
Wen Tao said that after two consecutive months of rapid rise, the growth rate of raw material prices in the manufacturing industry has slowed down significantly, and the purchase price index has dropped significantly. Combined with the purchase price index, the purchase volume index and the change of the raw material inventory index, due to the continuous rapid rise in the purchase price of raw materials in April ~ May, the cost pressure of manufacturing enterprises increased, and in June, enterprises reduced the purchase of raw materials, increased the consumption of raw materials in inventory, and the price support of raw materials weakened accordingly.
According to the data, the proportion of manufacturing enterprises reflecting high raw material costs in June was 43.7%, down 1.2 percentage points from the previous month.
In terms of the scale of enterprises, large, medium and small manufacturing enterprises all performed positively in June. The PMI of large enterprises was 50.1%, which remained at 50% and above for 14 consecutive months, and the production index remained above 52% for 4 consecutive months, indicating that large enterprises maintained stable and increased operation, and production activities continued to rise, showing strong resilience.
Thanks to the implementation of a number of policies to support small and medium-sized enterprises, the operation of small and medium-sized enterprises stabilized in June. The PMI of medium-sized enterprises was 49.8%, an increase of 0.4 percentage points from the previous month, and the production index and new orders index both rose to more than 51%, indicating that the supply and demand of medium-sized enterprises both recovered month-on-month. The PMI of small enterprises was 47.4%, up 0.7 percentage points from the previous month, and the new orders index increased by nearly 2 percentage points from the previous month, indicating that small enterprises have stabilized their operation and market demand has improved.
In addition, business expectations are broadly stable. The expected index of production and business activities was 54.4 percent, up 0.1 percentage points from the previous month. From the perspective of industry, the expected index of production and business activities in agricultural and sideline food processing, metal products, railways, ships, aerospace equipment, electrical machinery and equipment and other industries is in a relatively prosperous range of more than 58.0%, and enterprises have strong confidence in the development of the industry.
Wen Tao said that summarizing the trend of manufacturing PMI in 1~6 months, the mainland economy as a whole maintained a stable recovery in the first half of the year, with an average manufacturing PMI of 49.8%, an increase of 0.3 percentage points from the average value in the second half of last year. Although the monthly index fluctuated, the development trend of production maintaining steady growth, continuous optimization of industrial structure, and stable improvement of large enterprises is relatively clear.
Regarding the next trend, Wang Qing said that the manufacturing PMI index in July may continue to be in the contraction range, but the contraction will be moderated. First of all, there will be a succession of important meetings in July, and market confidence is expected to be boosted. Secondly, the recent government bond issuance has accelerated significantly, large-scale equipment renewal and durable consumer goods trade-in measures are being implemented, coupled with the promotion of the development of new productivity and the "three major projects" in an all-round way, manufacturing investment and infrastructure investment will maintain rapid growth, will have a certain role in driving both ends of supply and demand in the manufacturing industry. However, it is necessary to pay close attention to the impact of the real estate industry on the overall manufacturing boom level.
The non-manufacturing PMI fell to its lowest level this year
In June, the non-manufacturing business activity index was 50.5%, down 0.6 percentage points from the previous month. Among them, the business activity index of the service industry was 50.2 percent, down 0.3 percentage points from the previous month, and the business activity index of the construction industry was 52.3 percent, down 2.1 percentage points from the previous month.
Wu Wei, an expert from China Logistics Information Center, said that following the concentrated release of demand during the "May Day" holiday, contact consumption-related service industry activities have fallen on the basis of a high base, which is the main factor leading to the slowdown in growth. The business activity indices of retail, accommodation, catering and recreational-related industries all decreased to varying degrees from the previous month.
However, the business activity expectation index has risen, indicating that business expectations are improving. In June, the non-manufacturing business activity expectation index was 57.2%, up 0.3 percentage points from the previous month. By industry, the business activity expectation index of the construction industry was 54.7 percent, down 1.6 percentage points from the previous month, and the business activity expectation index of the service industry was 57.6 percent, up 0.6 percentage points from the previous month.
Wu Wei believes that construction companies have lowered their business activity expectations due to the upcoming rainy season. The advent of the summer consumption season has raised the business activity expectations of the contact-related service industries, and the business activity expectation index of the retail, accommodation and catering industries has increased significantly from the previous month, and all of them are at a high level of more than 59%. Summer consumer demand is expected to be released in the next two months, becoming the main driving force to support the smooth operation of the non-manufacturing industry.
In the first half of the year, non-manufacturing business activities continued to maintain an expansion trend, and the average non-manufacturing business activity index in January ~ June was 51.3%, an increase of 0.4 percentage points from the average level of 50.9% in the second half of last year. However, since the second quarter, the growth rate of non-manufacturing business activities has slowed down month by month, and the difficulty of sustaining demand increment is one of the main factors. In June, the non-manufacturing new orders index was 46.7%, down 0.2 percentage points from the previous month, and has been running below 50% since May last year.
According to institutional analysis, it is expected that the macro policy in the second half of the year will continue the counter-cyclical adjustment mechanism in the second quarter and continue to support and consolidate the macroeconomic recovery momentum.
The regular meeting of the Monetary Policy Committee of the People's Bank of China for the second quarter of 2024 was held in Beijing recently. The meeting believes that the domestic economy is still facing challenges such as insufficient effective demand and weak social expectations, and it is necessary to increase the implementation of the monetary policy that has been introduced, focus on expanding domestic demand, boost confidence, and promote a virtuous cycle of the economy. Institutions generally said that in the third quarter, in the context of the global interest rate cuts, the mainland's monetary policy is expected to be further loosened, and on the whole, the structural monetary policy will be stronger than the aggregate policy. The RRR and interest rate cuts may be implemented in the second half of the year, but the specific nodes will depend on the interest rate differential between China and the United States and the changes in the RMB exchange rate.
(This article is from Yicai)