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Business conditions improved in March, following two consecutive monthly declines, although the average for the first quarter of 2014 was the weakest for a year and a half.
The MNI China Business Indicator rose to 53.4 in March from 50.2 in February, the first rise in three months and the highest reading since December. Evidence from the survey showed that credit availability was at its highest for two years, a sign that the authorities have relaxed their firm grip on lending.
The recent depreciation of the Chinese yuan also appeared to have a positive impact on exporters, with more companies reporting that it was helping their business.
In spite of the latest pick-up, the average level of the Business Indicator for the first quarter was just 51.9, down from 55.7 in the fourth quarter, and the lowest level since the third quarter of 2012. The Business Indicator has a strong correlation with the official data and the slowdown suggests that GDP growth in the first quarter will ease from the 7.7% rate seen in the fourth quarter of 2013.
Labour market conditions weakened significantly, with the Employment Indicator falling to 46.1 in March from 51.1 in February, the lowest reading since January 2009. Given the recent economic weakness it could be that companies have not been so quick to re-hire workers after the New Year holiday.
Commenting on the data, Chief Economist of MNI Indicators Philip Uglow said, “This is the first snapshot of how the Chinese economy performed in March and we saw a pick-up from the five year low seen in February.”
“Speculation has mounted that the Chinese authorities have back-peddled on their lending crackdown, and our survey clearly supports this view as companies reported an improvement in access to credit. Moreover, if it is Beijing’s goal to boost growth by devaluing the currency, evidence from our panel of companies suggests it is already reaping rewards,” he added.
