BEIJING, March 21, 2016 /PRNewswire/ -- Confidence among executives at China's largest companies remained stable in March, with firms evenly split on the development of business conditions over the past month, according to the latest MNI China Business Sentiment Survey.
The MNI China Business Sentiment Indicator, a monthly gauge of current business sentiment, was unchanged at 49.9 in March. This was the second consecutive month sentiment has been just below the 50 mark. Firms remained relatively more upbeat about the coming three months, with the Future Expectations Indicator increasing further above the current measure, providing some hope that the situation may improve.
The weakness in overall sentiment belied some improvement in other key metrics in the survey. Most notably, Production and New Orders both picked up in March, following a setback in February. Companies expected increased activity to continue over the next three months, with the Future Expectations Indicators for both measures regaining some ground lost in the previous month. There was also an improvement in the Employment Indicator which increased to the highest since September 2015.
Note that the recent RRR cut from the People's Bank of China came during our survey period so would have been partly reflected in this month's survey results. The cost of credit, measured by the Interest Rates Paid Indicator, edged down notably following a rebound in February. Although the Availability of Credit Indicator eased again in March, it remained above the breakeven 50 level. Meanwhile, the expectations measures for both indicators shifted more towards an easing bias, suggesting that companies expect more policy adjustment.
While increased disinflationary pressures in the prices that companies charged were still evident in March, this came alongside a surprising rise in input prices. The Prices Received Indicator fell to 39.1 in March from 39.8 in February, the twentieth straight month below the 50 breakeven level. On the back of the rebound in oil prices seen recently, firms reported that the price of their inputs rose at the fastest pace since October 2015. The Input Prices Indicator rose to 55.3 in March from 50.7 in February, with upward pressure on prices from the manufacturing sector.
"Recent results from the survey have shown that the strains on business have increased with the MNI China Business Sentiment Indicator below 50 for the second consecutive month, something not seen since the global financial crisis. Increases in Production, New Orders and Employment, though, suggest firms are on balance withstanding the various macro challenges, with looser policy helping," said Philip Uglow, Chief Economist of MNI Indicators.
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