The 'expected' for this was 46.0 (Bloomberg poll) and 45.7 (Reuters poll) but those were not incorporating what we got over the weekend:

40.3 on the month:

  • weaker than 40.9 in November 2008 (amidst the GFC)
  • the lowest level since the survey launched in early 2004

Highlights from the report:

  • Record falls in output, new orders and employment
  • Travel restrictions lead to sharp deterioration in supply chains
  • Business confidence rises on hopes of output recovering

Commenting, Dr. Zhengsheng Zhong, Chairman and Chief Economist at CEBM Group

  • supply and demand sides of the manufacturing sector were both weak
  • 1) Both the subindexes for output and total new orders plummeted into contractionary territory and hit their lowest levels on record. Supply chains came to a standstill as businesses extended the Lunar New Year holiday and multiple local governments implemented restrictions on transportation and the movement of people in efforts to control the epidemic. The gauge for new export orders remained in negative territory and slumped to the lowest point since January 2009.
  • 2) There was a large backlog of previously accumulated orders due to stagnant supply chains. While both the subindexes for employment and suppliers' delivery times remained in negative territory and dropped to record lows, the gauge for backlogs of work remained in positive territory, to highlight the strongest rise since April 2005. Manufacturers were faced with great pressure to deliver orders with insufficient operational capacity amid the impact of the epidemic. While the gauge for stocks of purchased items fell to its lowest point since January 2009, the one for inventories of finished goods rebounded slightly, indicating that both the supply and demand sides were stagnant. Both gauges remained in contractionary territory.
  • 3) Industrial product prices dropped slightly. While the measure for output prices fell into negative territory, the one for input costs remained in positive territory despite a small drop. Companies have been under pressure to cut prices in the face of declining demand. Pressure on costs of raw materials remained large, but it was no longer a major problem.
  • 4) That said, business confidence continued to improve, with the gauge for future output expectations hitting a five-year high. This was due chiefly to more-proactive macroeconomic policies and policymakers' support for small and midsized enterprises. "China's manufacturing economy was impacted by the epidemic last month. The supply and demand sides both weakened, supply chains became stagnant, and there was a big backlog of previous orders. However, manufacturers were more confident. The economy will be able to see a significant rebound when the epidemic is gradually contained and companies accelerate the resumption of business amid moreproactive fiscal and monetary policies."