Huachuang Securities: Why is the investment in equipment by American companies diverging from the PMI?

Huachuang Securities released a research report stating that in the 2024 Q3, there was a strong increase in capital goods shipments and imports in the US, but the PMI data remained weak, deviating from expectations. The reason for this may be that the strong increase in capital goods imports and shipments comes from the computer-related industry (computers, computer components) and civil aviation industry. However, due to the overall weak performance of a wider range of manufacturing activities and the fact that the computer-related industry and civil aviation industry constitute a small proportion of the overall manufacturing industry, they are not enough to significantly boost overall manufacturing activity and thus lead to a weak PMI performance. The main points of Huachuang Securities are as follows: 1. Why is there a deviation between US corporate equipment investment and PMI? - A data discrepancy in the US: Strong increase in capital goods shipments and imports in 2024 Q3, but PMI remains weak. - Why are capital goods imports and shipments strong? The computer-related industry and civil aviation industry are the main driving industries for strong imports and shipments by enterprises. 2. Why is manufacturing PMI not strengthening in sync? - On one hand, improvements in corporate investment are concentrated in the computer-related industry and civil aviation sector, but the overall performance of a wider range of manufacturing activities is not strong. - On the other hand, the computer-related industry and civil aviation sector are limited in size. Capital goods account for about 17% of manufacturing shipments, with the computer-related industry accounting for only about 3% of domestic capital goods shipments, and civil aviation accounting for about 16% of domestic capital goods shipments. However, since most manufacturing industries are still experiencing weak growth, the computer-related and civil aviation industries are not enough to significantly boost overall manufacturing activity and lead to a notable improvement in the PMI, resulting in data discrepancies. 3. How to look forward to enterprise equipment investment in 2025? - Considering the uncertainty of future growth in strong aircraft investments in 2024, while computer investments are expected to remain high, it is expected that GDP equipment investment in 2025 may find it difficult to continue the strength of 2024 Q3, but it is still expected to remain resilient. In addition, the report also includes a monitoring of overseas high-frequency data and events, such as a review of important data and an analysis of the US economic fundamentals and liquidity. Risk warning: Data may not be updated in a timely manner, and Fed monetary policy may exceed expectations.