MNI China Business Sentiment Indicator: Chinese Business Sentiment Firms In October - Cheaper Credit Fuels Optimism But Production & New Orders Unchanged

Sentiment among executives at China’s largest companies picked up in October following September’s fall, as firms reported that credit costs were lower and that access to funds remained above average.
 
The MNI China Business Sentiment Indicator, a gauge of current business sentiment, rose 8.4% to 55.6 in October from 51.3 in September, although not quite enough to surpass August’s reading of 56.
 
The relative quiet in both the policy environment and financial markets was taken as a positive in October. External factors have heavily influenced sentiment in recent months with headline sentiment buffeted by the monthly news flow while activity on the ground has remained relatively stable. In October the Production indicator eased 1.5% to 59.7, while New Orders were unchanged from last month, with both remaining significantly above the 50 breakeven level.
 
The cumulative effect of monetary easing to date appears to be continuing to flow through, with businesses reporting that the interest rates they paid fell further in October to the lowest since 2012, while the Availability of Credit Indicator edged a little further into expansion. On the currency side, firms continued to report that the exchange rate was helping their operations, however the proportion dropped a little from last month.
 
After plunging to the lowest since the survey began, expectations for the future recovered some ground in October, although the more positive assessment wasn’t enough to allay concerns over employment, with a greater proportion of companies signalling that they had too many employees for their current workload.
 
“It has been a volatile period for the MNI China Business Sentiment Indicator as it has been buffeted by a range of external factors. While there have been ups and downs in recent months, overall the ups appear to hold the stronger hand with sentiment above the recent low in July and more in line with other activity measures in the survey. October saw firms reporting lower credit costs with monetary policy easing flowing through and helping to support activity. The current balance of evidence suggests that Chinese businesses have weathered the worst of the headwinds 2015 has to offer”, said Philip Uglow, Chief Economist of MNI Indicators.