The PMI fell to 49.5 percent in March

2022-06-08 0 By

The manufacturing purchasing Managers’ index (PMI) dropped 0.7 percentage points from the previous month to 49.5% in March, below the critical point, indicating that the overall business level of the manufacturing industry has dropped somewhat, according to data released by the National Bureau of Statistics (NBS) on March 31.Analysts pointed out that it is not surprising that the PMI fell back in March and temporarily fell below the critical point, mainly due to the recent impact of the epidemic.In the face of new downward pressure on the economy, it has become the consensus of the industry to increase the policy of steady growth.At the same time, there is still a foundation for the stable operation of the industrial economy. With the progress of local epidemic prevention and control, and the effect of policies to stabilize growth, there is a high probability that the PMI will return above the critical point in the future.”Recently, clusters of COVID-19 have occurred in many places in China and geopolitical instability has increased significantly, which has affected the production and business activities of Chinese enterprises to some extent.”National Bureau of Statistics service survey center senior statistician Zhao Qinghe said.In March, the manufacturing purchasing managers’ index, the non-manufacturing business activity index and the composite PMI output index were 49.5 per cent, 48.4 per cent and 48.8 per cent respectively, down 0.7, 3.2 and 2.4 percentage points from the previous month, all falling below the critical point.”Considering various aspects of economic recovery, we believe that the recent outbreak of COVID-19 in many places is the main cause.”Zhang Liqun, a researcher at the Macro-economic research department of the Development Research Center of The State Council, said the PMI in March fell below the critical point, which is quite different from historical data.Hongta Securities macro analyst Sun Yongle believes that the epidemic is the main factor causing the weakening of manufacturing prosperity.”Since March, a new round of COVID-19 has hit both domestic production and consumption.”In addition to the epidemic, escalating geopolitical conflicts overseas have led to increased imported inflationary pressure, and rising prices of some raw materials have also had a certain impact on industrial production, Sun said.Affected by the recent sharp fluctuations in international commodity prices, the purchasing price index and ex-factory price index of major raw materials in March were 66.1% and 56.7%, respectively, up from 6.1 and 2.6 percentage points in the previous month, both rising to their highest levels in nearly five months.The increased risk of imported inflation makes the middle and lower enterprises face greater cost pressure.It is worth mentioning that the high-tech manufacturing industry remains resilient despite the impact of the epidemic, which has provided certain support to the manufacturing sector.In March, the PMI for high-tech manufacturing stood at 50.4%, still in expansionary territory.In the face of new downward pressure on the economy brought about by the epidemic, it has become the consensus of the industry that the policy of steady growth will continue to be increased.Steady economic performance in the first and first half of the year is crucial to achieving the full-year target.Li Qilin, chief economist at Hongta Securities, said the first quarter of the year was affected by the epidemic in March, and supportive policies will be rolled out to keep the economy running smoothly in the first half.For the policy direction, the CICC report is expected that the policy will start from both ends of supply and demand.On the one hand, efforts should be made to ensure stable supply and prices, ensure smooth logistics, and minimize the negative impact of the epidemic prevention and control on industrial production.On the other hand, effective demand will be further boosted by other regulatory policies in addition to infrastructure investment, focusing on supporting the service sector, which is hard hit by the epidemic.Wen Bin, chief researcher of China Minsheng Bank, said macro policies should focus on this year’s economic development goals and increase efforts to support steady growth.Fiscal policy will make early use of tax and fee cuts, and make good use of government bonds to increase effective investment and boost demand.Monetary policy will give full play to both the aggregate and structural functions of policy tools, cut the required reserve ratio and interest rates at an appropriate time, maintain adequate liquidity, increase support for small and micro businesses, scientific and technological innovation, green development and other areas, boost the confidence of market players, and stabilize the overall macroeconomic market.In recent days, the central and local governments have adopted a series of policies to provide relief to micro, small and medium-sized enterprises (msmes) hit hard by the epidemic, including delaying payment of social insurance premiums, reducing rent and increasing financial support.Wu Chaoming, vice president of Caixin Research Institute, predicted that the probability of follow-up PMI will return to above 50%, and industrial production is expected to improve on a monthly basis.On the one hand, the effect of proactive policies is emerging, and the policy implementation is expected to be further intensified, and the recovery rate of infrastructure investment is expected to accelerate, thus boosting industrial production.On the other hand, supply shocks such as energy supply are expected to ease constraints on manufacturing production.Meanwhile, while real estate investment growth has slowed, it is expected to stabilize gradually.According to Zhao qinghe, some surveyed companies said that as the epidemic has been effectively brought under control in some areas, suppressed production and demand will gradually recover and the market is expected to pick up.