China’s economic pulse holds up as market woes widen
Some of the earliest indicators of China's economy are pointing to further stabilisation, underscoring the gulf between market panic and what's happening on the ground.
Smaller businesses in the services sector showed more resilience, while manufacturing experienced a further deterioration - a continuation of the rebalancing theme that marked 2015. Search engine data on interest in small and medium sized businesses signals momentum there remains steady, while a separate reading of business confidence held up as firms get a boost from a weaker currency.
The freshest reports - which come ahead of the first official indicators of manufacturing and services activity due on February 1 - add to evidence the world's second-largest economy is holding up as a stronger services sector underpins the labor market. That's welcome news for policy makers battling slower growth, capital outflows and plunging shares that have shaken investor confidence worldwide at the start of the year.
The Bloomberg monthly GDP tracker was 6.69 per cent in December, down slightly from the prior month and just shy of the officially announced 6.8 per cent expansion in the fourth quarter. Other proxies show a mixed picture, according to a report on Monday by Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing.
Oxford Economics estimated growth was 6.1 per cent in the fourth quarter, while Barclays figured 5.6 per cent, his note said. Capital Economics calculated growth at 'just over' 4 per cent based on its proxy gauge tracking freight volumes, passenger numbers, electricity output, sea cargo volumes and floor space area under construction. As for January, here's what the economy's earliest tea leaves are showing:
Two private indexes based on surveys covering more than 4,000 companies are now back after a one-month suspension during which the publishers tweaked their methodologies. The gauges published jointly by China Minsheng Banking Corp and the China Academy of New Supply- side Economics show more divergence between services and manufacturing.
The Minxin non- manufacturing index for smaller companies climbed to 43 from 40.9, heading back toward the 50 line that divides between improving and deteriorating conditions.
The gauge for small manufacturers showed less promise, falling to a record low 41.8 in January.
Baidu's index of how often its search engine serves up queries into small- and medium- sized companies remained steady in the "slightly prosperous" range in January. The preliminary reading of an index from the Beijing-based company stayed at 100.1, the same as December's final reading. December's reading was the first in 10 months to climb above 100, the dividing line between positive and negative readings.
Baidu also forecasts the government's official manufacturing PMI in January and February will rise above 50. The gauge has remained below that level for five months through December.
Another indicator based on a monthly survey of sales managers for medium and large private- sector companies edged down to 51 in January from 51.4 in December. Sub-gauges from research firm World Economics show business confidence and recruitment fell to alltime lows, while sales and production indexes indicate "continuing but increasingly modest" expansion.
"Chinese economic growth continues, but at a much slower rate than a year ago," the London-based institute's researchers wrote in their January 20 report.
Market News International's gauge of current business confidence fell slightly to 52.3 in January from 52.7 in December. The monthly poll of Chinese companies listed on the Shanghai and Shenzhen exchanges found firms were helped by the yuan's depreciation.
"While there are heightened risks, overall sentiment among businesses remained relatively resilient in January, with output and orders measures actually ticking higher," MNI Indicators Chief Economist Philip Uglow said in a statement. "It points to a more optimistic, or at least less pessimistic outlook, than current doom- laden headlines."