BEIJING, July 22, 2015 /PRNewswire/ -- After showing encouraging signs that a more supportive policy was having an impact in June, business confidence pulled back sharply in July, matching April's more than six year low, according to the latest MNI China Business Sentiment Survey.
The MNI China Business Sentiment Indicator, a gauge of current business sentiment, slipped back into contraction by falling 8.8% to 48.8 in July from 53.5 in June. In previous months, incremental gains in sentiment have been led by a firming in output and orders. The latest fall in overall sentiment outstripped the declines in the Production and New Orders indicators -- although these both also fell significantly -- suggesting that other factors, principally uncertainty brought on by the large correction in the stock market, may have played a part. Still, companies did not report a significant impact on their own financial position.
Firms also pared back their expectations for the future, with the Future Expectations Indicator down 6.4% to 54.1 in July, below the long run average.
Non-seasonally adjusted figures showed a significant increase in the percentage of respondents who thought that conditions had worsened over the month, rising to 23.3% in July from 12.8% in June. This came mostly at the expense of the share of respondents who had previously reported unchanged business conditions, which fell to 59.4% from 69% previously.
Both Production and New Orders relinquished the gains notched up in May and June, and now stand well below the levels recorded in the same period last year. Firms also cut back their forecasts for output in the short-term, with the Future Expectations Indicator for Production falling to the lowest since 2009.
More positively there was a clear sign that the four rate cuts since November and the two cuts to the reserve ratio requirement in the same period are flowing through to business. The Availability of Credit Indicator increased again in July and now stands at a five-year high.
"The sharp pullback in the MNI China Business Sentiment Indicator, after the more positive June reading, marks a disappointing start to Q3. The woes of the stock market over the past month may well have dented confidence, although at present it is difficult to gauge the impact. More positively, increased credit availability among our panel suggests that stimulus measures are starting to feed through more prominently which may help to underpin growth ahead," said Philip Uglow, Chief Economist of MNI Indicators.
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.
About MNI Indicators
MNI Indicators, part of Deutsche Borse Group, offers unique macro-economic data and insight to businesses and the investment community. We produce data and intelligence that is unbiased, pertinent and responsive. Our data moves markets.
For more information, visit our website at www.mni-indicators.com.
