Sentiment towards the Chinese business environment improved slightly in September as higher new orders helped to offset a slight softening in output, according to the latest MNI China Business Sentiment Survey.
The MNI China Business Sentiment Indicator, a gauge of current business sentiment, rose 3.1% to 55.8 in September from a revised 54.1 in August, leaving confidence at the highest level since August 2015.
The latest uptick was driven by a further strengthening in confidence among manufacturing companies, and could be read as a sign that domestic economic conditions in China remain stable.
Firms also turned more upbeat about the future, with the Future Expectations Indicator holding well above the current measure, giving some hope that underlying growth momentum in the broader economy will likely be maintained over the coming months.
One of the bright spots in the survey was the pickup in New Orders, with firms signaling some strength in both current and expected demand. The latest outturn adds some hope that the improved trade data seen in August may continue.
New Orders, a key signal of business demand, rose to 59.5 in September from 56.3 in August, the highest since July. Companies also expanded their inventory holdings amid expectations of higher demand.
While overall business conditions improved, other key metrics in the report moderated in September. In particular, there was a slight pullback in output and hiring intentions, with the Employment Indicator falling to the 50 threshold in September. Moreover, credit was slightly less abundant in September with the indicator declining marginally to 52.1 from 52.6 in August.
Meanwhile, costs of raw materials eased again in September. The Input Prices Indicator fell to the lowest since November 2015, bringing some relief to companies which have struggled to raise the prices of their own goods and services due in part to sluggish demand and overcapacity.
“The latest MNI China Business survey saw headline sentiment rise to a thirteen-month high suggesting that the Chinese economy will likely end Q3 on a fairly strong note, with growth holding up in both manufacturing and services,” says Andy Wu, Senior Economist of MNI Indicators.
“While the outlook remains challenging, our forward-looking activity indicators suggest that growth momentum is likely to continue into the final quarter of the year, supported by a continuation of policy easing.”