BEIJING, Sept. 21, 2015 /PRNewswire/ -- Business sentiment among executives at China's largest companies pulled back in September, the latest twist in a volatile period since July. Most underlying components of the survey fared better than the overall measure, with the increase in August now looking more like an overreaction following July's turmoil rather than a sustainable change in fortunes.
The MNI China Business Sentiment Indicator, a gauge of current business sentiment, fell 8.4% to 51.3 in September from a revised 56.0 in August. The latest release saw minor revisions stretching back to the start of the series as part of the annual seasonal adjustment procedure.
Headline sentiment has been heavily influenced by external factors such as policy announcements and stock market volatility in recent months, although not even the rate cut and currency devaluation was enough to sustain last month's surge. Still, the devaluation has been taken positively by businesses with an increasing number noting that the currency was a help rather than a hindrance to their business operations. The Effect of the Yuan Exchange Rate Indicator rose 14.8% on the month to 55.7 in September from 48.5 in August. Meanwhile the cumulative easing since the end of 2014 has improved access to credit with the Availability of Credit Indicator 9.5% up from a year ago.
Accompanying the downward revision in current conditions came a plunge in companies' expectations for the future. The Future Expectations Indicator fell 11.8% in September to 52.1, the lowest since the survey began in 2007. Earlier in the year when the expectations indicator was in a similar position, a bevy of rate cuts spurred it to recover some of the lost ground. Its failure to react to the latest cut though could be a warning that firms are losing faith that the current path of easing is sufficient.
There was mixed news among the key activity components of the survey. Production held onto most of the increase in the previous month when it was at the highest level of the year. New Orders fell 8.3% on the month but remains well above the 52.5 recorded in July.
"Overall business sentiment is volatile, maybe not surprising given the current economic and financial backdrop. Dig a little deeper, though, and some of the core activity measures are performing better and are considerably up from the July lows. Moreover, companies have welcomed the yuan devaluation and continue to report improved access to credit. The survey contains a number of negatives, but even so, some of the intense pessimism surrounding China continues to look overblown," 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 Börse 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.
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