BEIJING, Jan. 22, 2015 /PRNewswire/ -- Following a strong end to 2014, business sentiment among China's largest companies fell at the beginning of 2015, led by significant declines in output and orders.
The MNI China Business Indicator fell to 53.7 in January from 56.2 in December, the first monthly drop in three months. Overall sentiment is now at the lowest since October, before the People's Bank of China cut its benchmark deposit and lending rates to stimulate economic activity.
December saw the Production and New Orders Indicators hit three and four year highs respectively, boosted by the approval of over $100 billion in infrastructure projects in October. The impact waned in January with both measures falling by just under 10% on the month. In spite of the latest fall, both indicators remained well above the breakeven 50 level and also above the 2014 average. This contrasts with the MNI China Business Indicator which is now slightly below it.
The recent efforts by the central bank to increase liquidity, including the rate cut, continued to have a positive impact on credit supply. The Availability of Credit Indicator eased slightly in January but remained above the breakeven 50 level. The cost of credit, measured by the Interest Rates Paid Indicator, increased following the significant drop in December, although it remains at a relatively low level.
The companies in our panel have not yet been able to capitalise on the decline in global commodity prices and still face a squeeze on prices. Input Prices increased to the highest since April 2012 while Prices Received fell to the lowest for just over two years.
"While the January data marked a disappointing start to the year, the latest fall followed significant strength towards the end of 2014 on the back of infrastructure spending and the rate cut. Trend growth in overall sentiment, orders and production still remains above last year's levels," said Philip Uglow, Chief Economist of MNI Indicators.
"We expect 2015, like 2014, to remain choppy with activity buffeted by domestic policy decisions. While the international environment remains volatile, we expect a general pick-up in global growth to help offset some of the slowdown in domestic investment this year. Still, further action from the central bank seems likely to support activity."
About MNI Indicators
MNI Indicators specialises in producing business and consumer surveys designed to present an advance picture of the economic landscape and highlight changing trends in business and consumer activity. Our timely reports explore attitudes, perspectives and confidence across the globe, including China, India and Russia. Alongside our core focus on consumer and businesses surveys in emerging markets, MNI Indicators produces the renowned Chicago Business Barometer (Chicago PMI), a key leading indicator of the US economy. MNI Indicators is part of MNI, a leading provider of news and intelligence, a wholly owned subsidiary of Deutsche Boerse AG, one of the largest worldwide exchange organisations.
Notes to Editors
Please source all information to MNI Indicators.
MNI China Business Sentiment is a monthly poll of Chinese business executives at companies listed on either the Shanghai or Shenzhen stock exchanges. Companies are a mix of manufacturing and service sector firms.
With over five years of history, the survey tracks and predicts Chinese economic conditions and is an important leading indicator of GDP.
Respondents are asked their opinion on whether a particular business activity has increased, decreased or remained the same compared with the previous month as well as their expectations for three months ahead, e.g. is Production higher/same/lower compared with a month ago?
Diffusion indicators are then calculated by adding the percentage share of positive responses to half the percentage of those respondents reporting no change. An indicator reading above 50 shows expansion, below 50 indicates contraction and a result of 50 means no change.
Data is collected through computer aided telephone interviews (CATI) and around 200 companies are surveyed each month.
Series which show a seasonal pattern are seasonally adjusted using the US Census Bureau's X12 seasonal adjustment program. Seasonal factors are calculated annually.
For more information:
Naomi Pickens
Media Relations
Deutsche Boerse
T+1-212-669-6459
naomi.pickens@deutsche-boerse.com
Editorial content:
Philip Uglow
Chief Economist
MNI Indicators
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info@mni-indicators.com
