On November 1, 2016, the Service Industry Survey Center of the National Bureau of Statistics and the China Federation of Logistics and Purchasing released China's purchasing managers' index (PMI).
1. The manufacturing PMI rose significantly
In October, the manufacturing PMI was 51.2%, a large increase of 0.8 percentage point over the previous month. First, production and market demand picked up and expansion accelerated. The production index and new orders index were 53.3% and 52.8%, up 0.5 and 1.9 percentage points over last month, and both figures peaked since this year. Second, new drivers of growth built up more quickly and the structure was continuously being optimized. High-tech manufacturing and equipment manufacturing PMIs were 53.7% and 52.3%, up 1.3 and 0.4 percentage points over last month, and both figures set a new record high this year. PMIs of pharmaceutical manufacturing, automobile manufacturing, electrical machinery and equipment manufacturing, computer, communications and other electronic equipment manufacturing exceeded 52.0%. Third, the supply-side reform made positive progress, and part of the traditional industries saw improving production and business activities. The recent market supply-demand relationship changed toward a positive direction. Production indexes of chemical raw materials and chemical products manufacturing, ferrous metal smelting and rolling processing, non-ferrous metal smelting and rolling processing, and other traditional industries were higher than those in last month and fell into the expansion range. Fourth, prices continued to rise, further stimulating production. As a result of cut production overcapacity, depleted stocks, and rebound in prices of some commodities, recent prices of raw materials continued to rise. The producer price index (PPI) of raw materials was 62.6%, up 5.1 percentage points over the previous month. Benefits of relevant enterprises improved. Fifth, enterprises were expected to continue to make positive progress. The expected production and business activities index was 58.5%, up 0.1 percentage point over last month, marking the fourth month in a row that saw an increase, and enhancing the confidence in the market.
However, we need to see that enterprises are still facing certain difficulties in production and business activities. First, due to weak global economic recovery, import and export were still grim. The new export orders index and import orders index were 49.2% and 49.9%, both of which were below the critical value. Second, more than 40% of enterprises had financial constraints and insufficient market demand, among which small- and medium-sized enterprises in particular had intensified financial constraints. Third, despite significant rebound in PMIs of small- and medium-sized enterprises, they were still below the critical value. According to the scale of enterprises, the PMI of large enterprises was 52.5%, down 0.1 percentage point over the previous month, still ranking the second highest this year and marking a stable trend; the PMIs of small- and medium-sized enterprises were 49.9% and 48.3%, up 1.7 and 2.2 percentage points over last month, showing an obviously narrowed shrinkage rate.
2. The non-manufacturing business activity index continued to rise
In October, China's non-manufacturing business activity index was 54.0%, up 0.3 percentage point over the previous month, marking the highest this year and continuing the good momentum of development.
The service sector made steady progress and its business activity index rose slightly to 52.6%, up 0.3 percentage point over the previous month, which was basically the same as that of the third quarter, and the trend was generally stable. With the rebound in manufacturing production and market demand, business activities of the producer services industry were more active, with its business activity index being 55.5%, up 3.4 percentage points over last month. Driven by the "National Day Golden Week", rail transport, air transport, postal services, telecommunications, broadcasting, television and satellite transmission services, Internet and software information technology services, tourism and other industries closely related to household consumption achieved business activity indices of above 55.0% within a high prosperity range, with total business volume growing rapidly. In addition, business activity indices of water transport, securities, real estate, residential service, and repair industries were below the critical value, with the total business volume declining.
The construction industry continued to secure high prosperity. With the rapid growth of infrastructure investment and new construction projects, demand of the construction market continued to be released, and its production continued to maintain rapid growth. Its business activity index was 61.8%, slightly down 0.1 percentage point over the previous month, remaining in a high prosperity range. In the construction industry, the business activity index of civil engineering construction was 64.1%, up 2.3 percentage points over the previous month. The employment index of the construction industry was 53.9%, up 1.7 percentage points over the previous month, marking the second month in a row that saw an increase.