China’s economy is off to a good start, manufacturing PMI is at 51% and above for 7 consecutive months

The China Federation of Logistics and Purchasing and the Service Industry Survey Center of the National Bureau of Statistics released on January 31 the Purchasing Managers Index (PMI) of China’s Manufacturing Industry for January 2021 was 51.3%, a decrease of 0.6 percentage points from the previous month. 51% and above indicate that despite the local epidemic rebound, the economy still maintains a rapid upward momentum. The changes in the sub-indices showed that the growth rate of market supply and demand in January declined and remained at a relatively good level. Among them, the consumer goods industry had a good development momentum. Large, medium and small enterprises have maintained stable operations, and the market is more optimistic about the outlook. The issue of rapid rise in corporate costs is worthy of attention.

　　 The economy continued its upward momentum and achieved a good start. Although the manufacturing PMI declined in January, the decline was not very large and remained at a relatively good level of 51.3%. The index fell because of short-term disturbances during the Spring Festival, which had a certain impact on the production and employment of some industries; second, the rebound of the epidemic in some areas caused a significant slowdown in the growth of manufacturing in the region. However, by comparison, the market supply and demand are basically stable. The new order index was 52.3%, down 1.3 percentage points from the previous month, and remained above 52%. New export orders fell 1.1 percentage points from the previous month and remained above 50%. External market demand continues to rise. The production index and the purchasing volume index were 53.5% and 52.0% respectively, down 0.7 and 1.2 percentage points from the previous month, and both remained at a relatively good level. The production of enterprises continued to grow. Taken together, the economy continued its previous rapid upward trend, and the momentum for positive development remained unchanged, and a good start was achieved in the new year.

　　 The consumer goods industry is gaining momentum. In January, as the Spring Festival approached, market supply and demand in the consumer goods industry rose rapidly, and the industry had a good momentum of development, which provided better support for the overall manufacturing industry. The PMI of the consumer goods industry was 52.3%, an increase of 1.8 percentage points from the previous month. The market demand of the consumer goods industry has risen rapidly. The new order index and the new export order index rose by 4.3 and 1.9 percentage points to 55.2% and 50.0%, respectively. Enterprises have also accelerated the pace of production to ensure market supply. The production index and purchase volume index rose 1.5 and 0.6 percentage points to 54.1% and 52.5%, respectively. Due to the rapid increase in the supply and demand of the consumer goods market, the market price also rose rapidly in the short term. The purchase price index and the ex-factory price index rose by 1.5 and 2.5 percentage points to 64% and 56.9%, respectively.

　　 Enterprises of different sizes have maintained stable operations. In January, due to the rebound of the epidemic in some areas, the operation of enterprises in the region was affected to a certain extent, but in comparison, enterprises of different sizes have maintained stable operations. The PMI of large enterprises was 52.1%. Although it was down 0.6 percentage points from the previous month, it remained at 52% or above for eight consecutive months, indicating that large enterprises continue to grow rapidly and continue to play a better supporting role. The PMI of medium-sized enterprises was 51.4%, down 1.3 percentage points from the previous month, and remained above 50% for eight consecutive months, still maintaining a steady upward momentum. The large proportion of small enterprises is the consumer goods industry. The rise in the consumer goods market has led to a rebound in the operation of small enterprises. The PMI of small enterprises rose by 0.6 percentage points from the previous month to 49.4%. The market supply and demand improved significantly. The production index and the new order index increased by 2.2 respectively from the previous month. And 0.9 percentage points to 51.4% and 49.4%.

　　 The market outlook is still relatively optimistic. In January, the economy continued its upward momentum, and the market also held more optimistic expectations for the market outlook. The production and operation activity index was 57.9%, although it declined from the previous month, it remained at a relatively high level. The raw material inventory index was 49.0%, an increase of 0.4 percentage points from the previous month; the finished product inventory index was 49.0%, an increase of 2.8 percentage points from the previous month. Taken together, companies have better confidence in the market outlook, and correspondingly increased inventory reserves for production and sales in the future.

　　 On the whole, in January 2021, the manufacturing industry will maintain a steady recovery and achieve a good start. As the epidemic eases, the manufacturing industry in the affected areas may rebound rapidly. The promotion of “Chinese New Year in situ” is also beneficial to the organization of production rhythms. It is expected that enterprise production is expected to accelerate after the Spring Festival, and market demand will be normalized under epidemic prevention and control. There is also greater room for growth, and the number of employed persons may pick up quickly. In the long term, with the continuous construction and improvement of the new development pattern, the high-quality development of the manufacturing industry will continue to advance, and the economy will continue to rise steadily.

　　 It is worth noting that the current cost of enterprises is facing a rapid rise. First, the prices of raw materials continued to rise rapidly. The purchase price index in January was 67.1%, a decrease of 0.9 percentage points from the previous month and remained at a relatively high level. According to the survey of enterprises, the proportion of enterprises reflecting high raw material costs reached 50.7%, an increase for 9 consecutive months. And the purchase price index is nearly 10 percentage points higher than the ex-factory price index, and the growth rate of raw material prices is significantly higher than the ex-factory price. The second is the increase in logistics costs. The proportion of companies that reflect high logistics costs increased by 5.3 percentage points from last month to 36.7%. Taken together, the cost pressure of enterprises is increasing, and the benefits are under pressure.