MNI China Business Indicator: China Business Sentiment Highest Since August - New Orders And Credit Availability Boost Confidence

Business sentiment among some of China’s largest companies increased for the second consecutive month in December, buoyed by stronger orders and increased availability of credit following the recent rate cut from the central bank.
 
The MNI China Business Indicator increased to 56.2 in December from 55.2 in November, the highest since August and up noticeably from the eight month low of 51.7 in October. The strength was led by greater confidence among companies in the service sector.
 
New Orders increased to the highest level for four years in December pointing to a more buoyant outlook than the current raft of gloomy forecasts. The relatively firm orders numbers seen over the past two months followed news at the end of October that infrastructure projects totalling nearly 1% of GDP had been approved.
 
Production also picked up sharply to the highest for over three years following the stronger orders data seen in the previous month.
 
In spite of the stronger data in November and December, for Q4 as a whole the MNI China Business Sentiment Indicator was down slightly compared with Q3, suggesting GDP growth is unlikely to recover from the Q3 weakness.
 
The move by the People’s Bank of China to cut benchmark interest rates for the first time since 2012 lifted business sentiment as this policy had a positive impact on credit availability. The Availability of Credit Indicator increased to 52.6 in December from 49.4 in November, the highest since August.
 
The employment situation improved for the second consecutive month, with the Employment Indicator pushing further above the 50 neutral level to 53.7 from 52.9 previously.
 
“In contrast to other more downbeat official data on the state of the economy our latest survey shows that businesses are already feeling the benefit from a raft of stimulus measures, including the recent cut in key rates. If sustained then the renewed strength in orders should help to sustain growth over the coming months,“ said Philip Uglow, Chief Economist of MNI Indicators.