OPINION
Market Rating Before FOMC MeetingJan 31
Manufacturing Activities in China Contracted due to the Ukrainian War
PMI data in China, which is the second largest economy in the world, today revealed the downside risks in economic activity due to the impact of the war.
According to the data of the China Federation of Logistics and Purchasing (CFLP) for March, manufacturing purchasing managers' index (PMI) was 49.5 points, down 1.4 percent compared to the previous month, while the non-manufacturing PMI was registered as 48.4 points, down by 6.2 percent. During this period, market expectations were 49.9 and 53.2 for manufacturing and non-manufacturing PMIs, respectively.
According to data published by the CFLP, in the manufacturing PMI for this period, inventories increased by 9 percent, while the manufacturing index fell by 5 percent, new export orders fell by 2.0 percent and the import index also declined by 9.0 percent.
In China, which is known for its zero Covid policy, the published report noted that the spread of the coronavirus cases is one of the main reasons for the decline in PMIs. In the new orders index, it was noted that the restrictions resulted from the lack of demand of enterprises were decisive in the decline. The report pointed out that supply and demand continue to tighten, and emphasized that supply chain and supply bottlenecks have increased significantly.
On the other hand, for non-manufacturing PMI, it was stated that the surge of the coronavirus cases slowed down the service industry, while input prices increased due to geopolitical risks resulted from the Russia-Ukraine war.
The report said that the input prices index increased by 2 points in March compared to the previous month to 55 points. Problems arose from the industrial, construction and service sectors, and the increase in energy prices, especially oil due to the Russia –Ukraine war, also raised logistics costs.
Given the geopolitical risks posed by the Russia–Ukraine war, the high course of energy prices, especially oil, caused cost pressures, resulting in risk aversion and leading to export orders to be delayed. It is possible to say that this situation has tightened the supply chain disruptions and supply bottlenecks that have already arisen due to the pandemic. It is also worth adding that in China, which has more than 27 percent of the world's manufacturing industry, the permanence of the contraction in PMI data may contribute to global inflationary pressures.
According to the data of the China Federation of Logistics and Purchasing (CFLP) for March, manufacturing purchasing managers' index (PMI) was 49.5 points, down 1.4 percent compared to the previous month, while the non-manufacturing PMI was registered as 48.4 points, down by 6.2 percent. During this period, market expectations were 49.9 and 53.2 for manufacturing and non-manufacturing PMIs, respectively.
According to data published by the CFLP, in the manufacturing PMI for this period, inventories increased by 9 percent, while the manufacturing index fell by 5 percent, new export orders fell by 2.0 percent and the import index also declined by 9.0 percent.
In China, which is known for its zero Covid policy, the published report noted that the spread of the coronavirus cases is one of the main reasons for the decline in PMIs. In the new orders index, it was noted that the restrictions resulted from the lack of demand of enterprises were decisive in the decline. The report pointed out that supply and demand continue to tighten, and emphasized that supply chain and supply bottlenecks have increased significantly.
On the other hand, for non-manufacturing PMI, it was stated that the surge of the coronavirus cases slowed down the service industry, while input prices increased due to geopolitical risks resulted from the Russia-Ukraine war.
The report said that the input prices index increased by 2 points in March compared to the previous month to 55 points. Problems arose from the industrial, construction and service sectors, and the increase in energy prices, especially oil due to the Russia –Ukraine war, also raised logistics costs.
Given the geopolitical risks posed by the Russia–Ukraine war, the high course of energy prices, especially oil, caused cost pressures, resulting in risk aversion and leading to export orders to be delayed. It is possible to say that this situation has tightened the supply chain disruptions and supply bottlenecks that have already arisen due to the pandemic. It is also worth adding that in China, which has more than 27 percent of the world's manufacturing industry, the permanence of the contraction in PMI data may contribute to global inflationary pressures.
