Business confidence at some of China’s largest companies picked up in November, supported by a strong bounce back in orders following the recent approval of a number of large infrastructure projects.
The MNI China Business Indicator increased to 55.2 in November from an eight month low of 51.7 in October. The latest increase left activity levels running above the average seen over the past 12 months.
Companies reported strong orders, with the New Orders Indicator increasing to the highest level since April 2011. The move was led by a sharp increase in orders in the manufacturing sector.
State media reported that 21 infrastructure investment projects were approved between late October and early November, totalling $113 billion or roughly 1% of GDP. When previous stimulus measures have been introduced, such as July last year, the New Orders Indicator has reacted very quickly. This was also the case in April this year after the announcement of the ‘mini-stimulus’ package.
Production made up a lot of the lost ground of the past two months, although was still a little way below the firmer growth seen over the summer. Encouragingly, the Employment Indicator bounced back above the 50 breakeven level in November, following a fall into contraction in October.
Firms reported a second month of recovery in credit conditions, although the Availability of Credit Indicator still remained below 50.
In spite of the pick-up in activity, inflationary pressures eased further, with Input Prices falling to the lowest since December 2013 and Prices Received easing further. The softness in both measures suggests that the subdued level of both producer and consumer price inflation will likely continue for some time yet.
“Following two months of weakness, our panel of companies reported a noticeable improvement in November. The sharp rise in New Orders is encouraging and should help to support output over the coming months. Still, the overall trend in confidence has weakened and points to little improvement in Q4 compared with Q3,” said Philip Uglow, Chief Economist of MNI Indicators.
FTSE Mondo Visione Exchanges Index:
MNI China Business Indicator: China Business Sentiment Stages Recovery - Bounce Back In New Orders Leads Improvement
Date 19/11/2014