In July, Caixin'S Manufacturing PMI Fell To 50.3, The Lowest Since May 2020

In July, China's manufacturing industry continued to expand, but the expansion momentum further slowed down. Caixin's China manufacturing PMI (purchasing manager index) in July 2021 released on August 2 dropped 1 percentage point to 50.3, the lowest since May 2020.

This trend is consistent with the National Bureau of statistics manufacturing PMI. The PMI of the manufacturing sector in July, released by the Bureau of statistics, was 50.4, down 0.5 percentage points from June and the lowest since March 2020.

In July, the supply of manufacturing industry continued to expand, but the growth rate was only weak, and demand contracted for the first time in more than a year. In July, the manufacturing production index and new orders index recorded new lows in 16 months and 15 months respectively. Some enterprises surveyed reported that customer demand was relatively weak; Other enterprises reflected that the rise in the ex factory price of products inhibited sales. Classified data showed that new orders for investment products grew strongly, but new orders for consumer goods and intermediate goods decreased.

Foreign demand remained stable as a whole. The index of new export orders in the manufacturing industry in July was slightly higher than the boom and bust line. The epidemic situation in different overseas regions was differentiated, and the impact on exports fluctuated.

The employment market did not change much. The manufacturing employment index in July was slightly higher than the boom and bust line, and it was in the expansion range for the fourth consecutive month. Some enterprises increase the use of labor to expand production capacity, while others are relatively cautious. With the stability of the employment market, the number of backlog has increased slightly.

Both the purchasing price index and the ex factory price index of the manufacturing industry declined, indicating that the inflation pressure eased slightly in July. However, the purchasing price index has been more than 5 percentage points higher than the boom and bust line for eight consecutive months. The enterprises interviewed said that the prices of raw materials remained high, especially the prices of industrial metals. In contrast, the ex factory price index is only slightly higher than the boom and bust line, recording a new low since October 2020, indicating that market demand is more sensitive to product prices and limits the pricing ability of enterprises.

Affected by local regional floods, epidemic situation and shortage of chips and other products, the logistics delivery time continued to extend, and the supplier supply time index in July remained in the contraction range. As the price of raw materials is still at a high level, the purchasing volume of manufacturing enterprises only increased slightly, and the inventory index of raw materials decreased in the contraction range. Enterprises continue to use finished goods inventory to deliver orders, finished goods inventory index continues to shrink, but the range slightly narrowed.

China's manufacturing industry is generally optimistic about the growth prospects in the coming year, but the degree of optimism has dropped to a 15 month low. Companies are worried that the global epidemic will not be controlled, and that supply chains will continue to be disrupted.

Wang Zhe, a senior economist at Caixin think tank, said that the marginal momentum of the expansion of the manufacturing industry slowed down in July, the market supply continued to expand, and the demand began to bear pressure. Enterprises were cautious in increasing employees and purchasing raw materials. Inflation pressure has been partially eased, and manufacturing entrepreneurs are still optimistic about the future, but it is lower than the long-term average. According to the relevant data of China's manufacturing industry PMI of Caixin in July, the recovery foundation of the national economy is not stable, the downward pressure of the economy is still great, and the confidence of entrepreneurs needs to be taken care of.