Original title: Manufacturing back into expansion territory in November production accelerates recovery domestic demand needs to be boosted

In the recent series of commodity supply stability policy support, the national economic prosperity has picked up.

The manufacturing PMI, released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing, came in at 50.1 per cent on November 30, up 0.9 percentage points from the previous month and back into expansion territory after running below the 50-50 line for two months.

Since mid-October, the price growth of energy and basic raw materials has slowed down significantly, and the cost pressure of raw materials for enterprises has eased. The purchasing price index for raw materials in November was 52.9 percent, down 19.2 percentage points from the previous month and the lowest level this year.

The surveyed experts told 21st Century Business Report that the recent policy of "ensuring supply and stabilizing price" has been strengthened in a timely manner to curb the momentum of rapid price rise. The manufacturing industry has recovered comprehensively, with obvious recovery at both ends of supply and demand, but a number of indicators of small enterprises are still in the contraction range, and the need to further ensure the implementation of the policy of "ensuring supply and stabilizing price" and small and medium-sized enterprises rescue.

At the same time, the surveyed experts stressed that the improvement of foreign demand in November is an important driving force for the overall stable recovery of market demand. However, the release of domestic demand is insufficient, and the inventory of finished products of enterprises has increased, so we need to make great efforts to expand domestic demand.

The index of raw material prices fell sharply

In November, the purchasing price index of major raw materials was 52.9 percent, down 19.2 percentage points from the previous month, reaching the lowest level in nearly 12 months.

Zhao Qinghe, senior statistician of the Service Industry Survey Center of the National Bureau of Statistics, said that the implementation of policies such as "ensuring supply and stabilizing prices" has been strengthened recently, and the momentum of rapid price rises has been curled. From the industry situation, the two price indexes of chemical raw materials and chemical products, ferrous metal smelting and calendering processing, non-ferrous metal smelting and calendering processing and other industries fell significantly to below the critical point.

Data from the National Bureau of Statistics showed that the market prices of coal, ferrous metals and other important means of production have dropped significantly after peaking in early mid-October. In the case of coking coal, the price dropped from 4,100 yuan per ton in mid-October to 3,010.7 yuan per ton in mid-November. In the black metal, the price of rebar and wire fell through 5,000 yuan successively. From mid-October to mid-November, the price fell by 1,124.4 yuan and 1,125.6 yuan per ton respectively.

Chen Zhongtao, chief economist of China Logistics Information Center, pointed out in an interview with 21st Century Business Herald that since the beginning of this year, the commodity price has risen rapidly, not only fast, large range, but also a wide range. Black, non-ferrous products, energy and chemical products, cement and glass and other building materials products, food and agricultural and sideline products have all seen sustained and substantial increases, and did not show significant improvement until November. Cost pressures in the middle and downstream industries are beginning to ease.

"The share of companies reporting high raw material costs fell 7.3 percentage points to 63.2 percent in November from the previous month." Wen Tao, an analyst at the China Logistics Information Center, said the slowdown in raw material price growth is spreading downstream, with the factory-gate price index falling 12.2 percentage points to 48.9 percent in November from the previous month, indicating that product selling prices have also fallen.

The production of basic raw materials has also picked up, and under the combined influence of seasonal consumption stimulus and bailout policies, it has laid the foundation for the coordinated recovery of the industrial chain and supply chain, and the recovery of the manufacturing sector is relatively comprehensive, Chen said.

Specifically, the equipment manufacturing PMI, high-tech manufacturing PMI and consumer goods PMI stood at 51.7 percent, 53.2 percent and 51.4 percent, respectively, up 0.5, 1.2 and 1.7 percentage points from the previous month. In terms of 21 sub-sectors, 15 sub-sectors' PMIs rose in November from the previous month, while only 9 sub-sectors' PMIs were below 50 percent.

Zhou Maohua, a macro researcher with the financial market department of Everbright Bank, said that the drop in the price index has eased market concerns about imported inflation. In addition, the manufacturing sector as a whole remains profitable and enterprises are optimistic about their business prospects, and most of them have taken the initiative to replenish inventories.

However, Zhou Maohua pointed out that although the decline of the stock of major raw materials in the manufacturing industry has narrowed, it is still below the line of growth and contraction. The raw material inventory indexes of large, medium and small enterprises are all lower than 50%, 48.4%, 48.8% and 44.7% respectively. At present, the predicament faced by the manufacturing industry has not been fundamentally solved, and it still needs to exert the continuous influence of the policy of maintaining supply and stabilizing price. In order to enhance the long-term development of market players confidence, beware of raw material prices again sharply rebound.

Domestic demand still needs to be boosted

Among the PMI growth in November, the production index led the recovery, rising 3.6 percentage points from the previous month to the expansion range of 52.0%. Among them, the production index of papermaking and printing, railway, shipping, aerospace equipment, electrical machinery and other industries was higher than 56.0%, and the production activities of these industries accelerated significantly.

Chen Zhongtao analysis, on the one hand is affected by the decline of raw material prices and tends to be stable, the downstream market changed the previous wait-and-see mood, seize the time for replenishment and production at the end of the year. On the other hand, power supply capacity continues to improve recently, and effective power consumption policies in many places are more scientific and targeted, accelerating the release of manufacturing capacity.

Meanwhile, the new orders index in November rose 0.6 percentage points from the previous month to 49.4%. The demand side of the manufacturing industry improved from the previous month, but still remained in the contraction range, with a large gap between the increase and the production index. Among them, agricultural and sideline food processing, food and wine and beverage refined tea industries into the traditional peak season, the new order index rose to 55.0% above the higher boom zone; However, wood processing and furniture, chemical raw materials and chemical products, ferrous metal smelting and calendering processing and other industries are in the low range below 43.0%, and the industry market demand is weak.

Chen said the rise in manufacturing demand in November, especially in consumer manufacturing, was related to seasonal consumption stimulus, such as the "Singles' Day" in China and the approaching Christmas spending season abroad. Energy-intensive industries such as chemicals and steel are still under pressure to cut production and protect the environment. At the same time, the impact of declining real estate investment on the economy will continue, and the repeated epidemic is still an important factor affecting the economy, so the demand of some industries is not strong.

According to the business survey, more than 30 percent of companies still reflect the lack of market demand, accounting for 37.6 percent in November, up 4 percentage points from the previous month.

"Taken together, the pressure of oversupply has increased, and the quality of economic recovery needs to be strengthened. We still need to take multiple measures to expand demand and stabilize the internal driving force of the economy." Wen Tao said.

The current manufacturing enterprises in our country are still mainly small and medium-sized enterprises, the impact is the most obvious.

According to the released data, the PMI of medium-sized enterprises in November stood at 51.2 percent, ending two consecutive months of contraction and rising above the critical point. The production index and new orders index were both in the expansion range, reflecting the recent recovery of production and demand of medium-sized enterprises. The small business PMI for November stood at 48.5 percent, up 1.0 percentage point from the previous month, indicating that the business climate of small businesses has improved, but many indicators are still in contraction territory.

Chen Zhongtao said the improvement of smes in November was due to a combination of government support policies for smes in the manufacturing sector, including more tax and fee cuts and financial support.

Earlier, The State Council issued a series of combination policies such as the Notice on Further Strengthening Assistance and Assistance to small and medium-sized Enterprises, which put forward practical assistance and assistance policies for a series of problems such as difficult financing, expensive financing and high cost of raw materials.

"The current policy promulgation and implementation need to have the overall consciousness, combination consciousness, if only for a product or industry problems to control, it must be 'pressing the gourd and floating the gourd', in related industries will continue to have problems. The new combination of policies introduced now should have a more significant effect in the coming months." Chen Zhongtao said.

New export orders underpinned the recovery in demand

Zhao Qinghe said that due to the continuous recovery of the world economy and the approaching of the Christmas consumption season abroad, the foreign trade business situation in November continued to improve in the previous month. The index of new export orders and import index were 48.5% and 48.1%, respectively, up 1.9 and 0.6 percentage points from the previous month.

In terms of industry conditions, the new export order index of pharmaceutical, automobile, electrical machinery and equipment industries in November was 3.0 percentage points higher than the previous month, rising to the expansion range, and the order quantity of industrial export products increased.

Chen Zhongtao stressed that in the current rising new export orders index process, the need to pay attention to improving the added value of export products. We should be wary of increasing the production burden and pollution emission of the manufacturing industry due to the influx of too many low value-added orders. We should increase the support for the export of high-tech manufacturing industry.

"Although the prices of raw materials and shipping have fallen, they are still at historic highs, and domestic labor costs are also on the rise. If enterprises continue to choose the previous export model of 'small profits and quick sales', they will only narrow their development path, and an excessively long supply chain will threaten subsequent production safety." Chen Zhongtao said.

Wen Tao pointed out that while the new export orders rose in November, the finished goods inventory index also rose 1.6 percentage points from the previous month to 47.9%, indicating that the improvement of foreign demand in November was an important driving force for the overall stable recovery of market demand, but the lack of release of domestic demand, enterprises finished goods inventory increased.

Zhou Maohua said that China's export is facing a complicated situation, from vaccine promotion, overseas large-scale stimulus policy support, demand is expected to maintain a recovery trend; However, a new variant of the novel coronavirus, Omicron, has once again swept overseas, which may support China's manufacturing industry, but may also prolong the repair time of the global supply chain and curb overseas demand.

In this regard, Zhang Liqun, special analyst of China Federation of Logistics and Purchasing, stressed that while the difficulties in the supply side are alleviated, the current need to focus on the expansion of domestic demand related work, in particular, to make good use of government investment to promote enterprise investment, employment and consumer consumption, as soon as possible to resolve the downward pressure caused by the constraints of demand.