Comments:

October PMI mainly reflects the following five points: First, raw material prices fell sharply. Stable supply and price after the initial effect, while the global commodity supply and demand gap is also recovering. Second, after the problem of power shortage and upstream price increase was solved, the production of the manufacturing industry improved significantly and the purchase volume also increased significantly. Third, domestic demand is still weak, small businesses are under pressure, and the impact of local COVID-19 on employment in the manufacturing sector and service sector is continuing. Fourth, manufacturing expectations for both imports and exports showed a marginal improvement. Fifth, the accelerated expansion of the new orders index in the construction industry is related to the requirement of credit policy to ensure the normal financing needs of the real estate sector and energy-intensive industries.

In the next step, Omicron may form a new impact, but the comprehensive impact is more complex: the demand level may lead to the interruption of the border opening process of various countries, the monetary level may delay the normalization process of global monetary policy, and the production level may cause the production disorder again. What is certain is that China's advantages in epidemic prevention measures and industrial chain stability will be further highlighted.

I. Manufacturing PMI Index and its sub-indexes:

1. With the sharp decline in the prices of raw materials, enterprises' procurement and production improved: in November, the purchase prices and ex-factory prices of major raw materials dropped to 52.9% and 48.9% respectively (72.1% and 61.1% before). As the price of raw materials fell sharply, the scale of orderly electricity consumption was close to zero, the production index of enterprises improved to 52.0% (48.4% before), and the purchase volume rose to 50.2% (48.9% before). The policy of maintaining supply and stabilizing price is effective, and the restriction of upstream prices on production of manufacturing enterprises is weakened, and the profit margin of middle and downstream enterprises is expected to improve. New orders index at 49.4% (last 48.8%), decline narrowed, but still below the growth line, domestic demand weak.

The Omicron strain has created a new shock to commodity prices, and the slope of the subsequent rebound will depend on the impact of the pandemic on real demand. The OPEC+ meeting in early December will be affected after its cautious tone; Biden's plan to work with oil importers such as Japan and South Korea to release reserves may have limited relief from price pressures.

2. Small enterprises are still under pressure, it is expected that the policy will strengthen structural and livelihood support: large enterprises in 50.2% (last value 50.3%), small enterprises are still 48.5% below the growth line (last value 47.5%), medium-sized enterprises improved, in 51.2% (last value 48.6%). The index of employees was 48.9% (48.8% before), and that of service workers was 46.6% (46.6% before). The impact of the local epidemic on employment in manufacturing and service industries is still continuing, and the policy support for people's livelihood may be strengthened.

3. Enterprises' expectation of import and export showed marginal improvement: the index of import and new export order were 48.1% and 48.5% respectively (47.5% and 46.6% in the previous value). As a leading indicator, the growth rate of export may remain at a high range, and the PMI of Europe and America is still at a high range of expansion. Import growth may pick up seasonally.

Second, non-manufacturing PMI index

1. Increase in construction new orders: construction PMI was 59.1% (56.9% before), and new orders were 54.2% (52.3% before), which is related to the credit policy requirements to ensure the normal financing demand of real estate and high-energy energy-consuming industries.

2. Services PMI maintains buoyancy: Services PMI at 51.1% (last 51.6%), price index down.