The Caixin China Manufacturing PMI (Purchasing Managers Index) for February 2021 announced on March 1st recorded 50.9. Although it has been in the expansion range for the tenth consecutive month, it has fallen for three consecutive months and has fallen since June 2020. The lowest value indicates that the marginal effect of the manufacturing recovery has further weakened.
This trend is consistent with the manufacturing PMI of the National Bureau of Statistics. The manufacturing PMI for February 2021 announced by the National Bureau of Statistics was 50.6, which was 0.7 percentage points lower than the previous month and also slowed down for three consecutive months.
Manufacturing supply and demand continued to expand, but the expansion rate slowed down. The production index and new order index in February recorded their lowest values in the past ten and nine months, respectively. External demand continues to drag down aggregate demand, and the new export order index has fallen sharply below the line of prosperity for the second consecutive month. In the survey, the interviewed companies emphasized the negative impact of the winter epidemic at home and abroad on the market’s prosperity.
Affected by the slowdown in the growth rate of supply and demand, the job market continued to be under pressure. The employment index in February remained in the contraction range for the third consecutive month, and the rate of decline has expanded. After the market has recovered and the pace has slowed down, companies are not eager to fill up the vacancies left by employees. Nevertheless, the number of backlogs of work that month fell for the first time in nine months, indicating weak market demand.
The price index continues to rise, and inflationary pressures continue to increase. In February, the purchasing price index of manufacturing enterprises was significantly higher than the rise and fall line, but the growth rate slowed down slightly. Respondents said that the prices of raw materials, especially industrial metals, continue to rise rapidly, and transportation prices have also risen. The increase in cost-end prices was also partly transmitted to the demand side. In February, the ex-factory prices of manufacturing enterprises continued to rise, but the growth rate slowed down.
Despite the slowdown in the expansion of supply and demand, operators of manufacturing companies are confident that the epidemic situation at home and abroad will improve. In February, the production and operation expectations index jumped to the second highest point since September 2014.
According to Wang Zhe, senior economist at the Caixin Think Tank, the recovery momentum of the manufacturing industry in February has further weakened, the growth of supply and demand has slowed, employment pressures have increased, and inflationary pressures have continued to increase. Nonetheless, companies are more optimistic about future expectations, and market confidence is mainly derived from the past. The accumulation of experience in epidemic prevention and control for more than a year, especially the unfavorable autumn and winter season is coming to an end. At present, it seems that both the need to carefully care for the economic recovery in the post-epidemic era and the need to pay sufficient attention to inflation are the main challenges facing the policy.