On October 31, 2017, the National Bureau of Statistics Service Survey Center and the China Federation of Logistics and Purchasing released the China Purchasing Managers Index (PMI). According to the data, China’s Manufacturing PMI for October stood at 51.6%, a decrease of 0.8 percentage points from the previous month. This marked the average level for the year so far, indicating that the manufacturing sector continued to expand. Among the five sub-indexes, the production index and new orders index remained above the 50-point threshold, while the raw material inventory, employment, and supplier delivery time indexes were below it.
Overall, when the manufacturing PMI is above 50, it signals growth in the manufacturing economy, whereas below 50 suggests contraction. As a key sector within manufacturing, the home appliance industry was in an expansion phase during this period, with dealers beginning to stock up ahead of major festivals like Double 11, Double 12, and the Spring Festival. This led to a steady rise in both upstream production and new order indices.
The question remains: will the color TV market, recovering from its low point, meet its annual targets? Looking at the color TV market, the first half of the year was turbulent. However, by the second half, prices of TV panels dropped sharply in August, leading to a peak season in September. Companies like Sharp were preparing to sell 14 million units this year. Data from the 43rd week of 2017 showed that Sharp's online sales surged by 715.6% year-on-year, while offline sales declined by 23.7%. Meanwhile, Sharp's overall sales grew by 246.7%, and its pre-orders during the Double 11 event exceeded 200 million yuan.
Hou Daowen, General Manager of TCL Multimedia's China Business Department, noted that during the Double 11 period, TV inventory reached three times the daily reserve level, presenting significant challenges. Production and stock preparation had already begun during the National Day holiday. The increase in orders from TV manufacturers inevitably led to higher consumption of upstream materials.
As the first half of the year ended, domestic color TV manufacturers continued to build inventory, which became a problem as the total stock levels surpassed healthy levels. In the following quarters, terminal manufacturers began to reduce purchases to manage excess stock. Although panel shipments started to decline, the supply of panels continued to grow, and panel prices fluctuated in the second quarter. With inventory control in the third quarter, the weak domestic color TV industry gradually improved, reversing the trend of less than 1% profit. The fourth quarter was seen as the final opportunity for domestic brands to meet their annual sales goals.
In the refrigerator industry, output for the first nine months of 2017 reached 74.144 million units, a 13.3% increase compared to the same period last year. Output in September alone was 8.466 million units, up 14.2% year-on-year. Industry analysts expect continued growth in October. The China National Business Research Institute predicted that refrigerator production would reach 94.495 million units in 2017, meaning a potential increase of 20 million units in the coming months. This indicates that upstream raw material orders are rising, and the production index remains strong, with raw material inventories decreasing.
Provinces like Anhui and Guangdong, home to major white goods manufacturers such as Midea and TCL, have driven national refrigerator production. Anhui produced 300.87 million units, a 5.44% increase year-on-year, ranking first in production. Guangdong, the second-largest producer, is home to many leading white-goods companies.
Although the domestic refrigerator market has been considered to be declining this year, it has shown steady growth over the past few years. Despite rising raw material prices, most companies have seen growth in production and revenue. However, the shift from price competition to value-based competition has posed challenges for some. The industry is now focusing on high-end markets, and the era of rapid growth and high profits may be over. Companies must adapt to new market dynamics quickly.
In the air-conditioning industry, after a high-growth period in 2017, concerns about inventory levels led to early signs of a cold season in 2018. Many manufacturers are now planning to upgrade their production to focus on smart technology. Some brands skipped equipment repairs in August, signaling overproduction. Despite this, shipments remained strong, and dealers continued to place large orders. Both the production and new orders indices remained high, driving the depletion of upstream stocks. Industry media warned that the upcoming cold season should not be taken lightly, as history shows that similar situations can lead to problems.
In contrast, the kitchen appliance industry has been the fastest-growing segment since 2014, driven by consumer upgrades. According to Zhongyekang data, the market size for kitchen appliances reached 61.8 billion yuan from January to August 2017, up 16.1% year-on-year. It is estimated that the market will reach 96.8 billion yuan by the end of the year, a 14.8% increase. This growth will drive demand for upstream raw materials and inventory consumption.
Behind the success of the kitchen appliance market lies fierce competition. As the market matures, several leading companies are accelerating industry consolidation, shaping the future of the sector.
The home appliance industry is a key indicator of China's manufacturing strength, reflecting broader economic trends. With the scale of markets for TVs, refrigerators, air conditioners, and kitchen appliances, the industry continues to drive the manufacturing PMI, offering a monthly snapshot of China's industrial health. As the third quarter approaches, with major promotional events like Double 11, Double 12, Christmas, New Year’s Day, and the Spring Festival, stocking activities continue, contributing to a higher manufacturing PMI. While the production and new orders indices fell slightly after three consecutive months of growth, they still outperformed the same period last year. According to Zhao Qinghe, a senior statistician from the National Bureau of Statistics, the current trend reflects slower growth in production and market demand, but the manufacturing sector continues to develop. High-end and consumer goods-related industries show sustained momentum, driven by supply-side reforms. The industry PMI remains in a favorable range, highlighting the cyclical nature of economic activity.
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