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Business confidence slumped in January to the lowest level in four months, following December’s sharp rise, with firms reporting falls in nearly all activity indicators.
The MNI China Business Indicator fell to 52.2 in January from a two year high of 58.4 in December with some companies reporting weakened demand ahead of the Chinese New Year. The December high was potentially boosted by improved hopes for the Chinese economy following the third plenum meeting in November which have now dissipated.
While the stimulus measures over the summer of 2013 helped to boost some of the business activity measures in the survey, particularly New Orders, many of these have now fallen back.
Only three out of the 13 current conditions indicators rose between December and January, while ten fell. Eight of the indicators remained above the breakeven 50 level, while five were below.
Firms’ inventory position improved during 2013 but remained at a low level. Any hopes of a rebuilding of stock levels, though, now seem to have gone, with the Inventories Indicator falling for the past four months to the lowest level since May 2013.
Commenting on the data, MNI Indicators' Chief Economist Philip Uglow said, “This was a very disappointing start to 2014 with business confidence hitting its lowest level in four months. December’s optimism now appears to have been a false dawn as the impact of the stimulus measures which helped to support business over the second half of last year has waned.”
“This year poses substantial challenges to the Chinese authorities who need to address the build-up of excessive debt levels and over investment, the short-term effect of which will bear down on growth. A continued improvement in the global economy, though, should give them room to take more action without the sharp hit to growth the government is keen to avoid.”
