Photographer: David Paul Morris/Bloomberg

Earliest Chinese Data Signal Slowdown Hasn't Bottomed Out Yet

  • Newly-resurrected Minxin manufacturing gauge suggests weakness
  • Confidence of businesses and sales managers slumps in February

The first indicators for China’s economy this month signal its slowdown hasn’t bottomed out yet, highlighting the case for continued stimulus as the nation prepares to host finance chiefs and central bankers from the Group of 20 later this week.

Private gauges of manufacturing and services fell to new lows, a reading of business confidence slipped, and interest in small and medium sized businesses deteriorated, the readings show. If confirmed in official data for February that starts to roll out from March 1, such weakness would suggest a slowdown in the nation’s old growth drivers may be deepening. 

Still, private data can be volatile, and readings may be distorted by the week-long Lunar New Year holiday in February. That was the government’s official view Monday, when it said there’s "no hard landing." The 2015 slowdown "was not as bad as some would make it out to be," the Xinhua News Agency said in a commentary.

Here’s what early indicators show for February:

Minxin Slumps

Gauges tracking both manufacturing and services based on surveys of more than 4,000 companies fell to new lows. The data, published since late 2014, were revised to reflect new methodology in December and publication resumed in January.

The Minxin manufacturing index fell to 37.5 in February from 41.8 in January, while the non-manufacturing gauge fell to 37.5 from 43, according to the China Academy of New Supply-side Economics. Numbers below 50 indicate deteriorating conditions.

"Monetary loosening has helped ease the tight conditions for businesses, but there’s still room to do more," Jia Kang, director of the Beijing-based academy and former head of the finance ministry’s research institute, said in a statement. He said weakness in the data may reflect seasonal distortions.

Waning Confidence

Market News International’s business confidence indicator fell to 49.9 in February from 52.3 in January. The New York-based agency surveys Chinese companies listed on the Shanghai and Shenzhen exchanges every month.

"Conditions remain subdued as companies weigh a more supportive policy environment with market volatility," Philip Uglow, chief economist of MNI Indicators, said in an e-mailed statement. "The significant fall in activity measures suggests that we’re unlikely to see a jump in economic activity" tied to the holidays in the second week of the month.

Small Business

An indicator tracking interest in small and medium-sized companies online dropped to 98.9 in February, signaling a "slightly depressed" conditions, according to Beijing-based Baidu Inc., operator of the nation’s top search engine. The gauge’s dividing line is 100.

Sales Managers

Early data did contain a sign of stabilization. Confidence of sales managers at medium and large private-sector companies edged up to 51.2 this month from 51 in January, though remained near recent lows, according to a survey by World Economics Ltd.

Even that increase was tempered by a more downbeat assessment: The index "suggests a more rapid fall in the rate of economic growth than reported by official data over the last year," the London-based research firm said in a statement.

— With assistance by Xiaoqing Pi

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