There's No Sign of a China Rebound Yet

No Early Signs of a Rebound in China
  • Minxin's gauges rebound, but levels still signal deterioration
  • Official manufacturing report projected to show slump enduring

China’s monetary and fiscal stimulus have yet to spur a rebound in the world’s second-largest economy, according to the earliest private economic indicators for March.

A purchasing manager’s index focused on small businesses, a gauge of corporate confidence and a new reading of the economy derived from satellite imagery all remained at levels signaling deterioration, though the pace of declines moderated. Sales manager sentiment was unchanged.

The reports follow mixed official data showing investment and property sales recovered in the first two months of the year as trade plummeted and manufacturing remained weak. Meanwhile, the newest data show government reforms to slash industrial capacity and shift to a greater reliance on consumption and services haven’t been able to offset the slump.

"Confidence of companies is still slowly bottoming," Jia Kang, director of the China Academy of New Supply-side Economics, said in a statement. "As long as the supply-side reforms can push forward, the effects will gradually show up."

That’s more unwelcome news for top officials who are gathered this week at the Boao Forum for Asia on the southern island of Hainan to discuss the challenges facing the economy and goals of the reform. Premier Li Keqiang will deliver a keynote speech Thursday and People’s Bank of China Governor Zhou Xiaochuan is scheduled to participate in a panel discussion with Commerce Minister Gao Hucheng and Foreign Minister Wang Yi.

The first official data for this month due out April 1 aren’t projected to show any bounce. The manufacturing PMI index probably rose to 49.5 in March, remaining below the 50 level that separates deteriorating conditions from improvement for a record eight straight months, according to economists surveyed by Bloomberg.

Here’s what the earliest readings show for March:

Minxin Recovers

Smaller manufacturers and service providers recovered some lost momentum in March, according to surveys of more than 4,000 companies conducted by Minsheng Bank and the China Academy of New Supply-side Economics.

The Minxin manufacturing index rose to 43.6 from a record low of 37.5 in February, while the non-manufacturing gauge increased to 40.1 from 37.5, according to the academy.

The two gauges, published since 2014, resumed release in January after a suspension in December. The academy improved seasonal adjustments, tweaked survey questions on financing and changed the name of the indexes to reflect their focus on smaller and medium-size enterprises, according to Peng Peng, a researcher at the Beijing-based academy.

The February slump was partly due to the seasonal distortions around the week-long lunar new year holiday, and more adjustments are in the works, Peng wrote in an e-mail.

Satellite Gauge

Deterioration also is visible from space, according to a new index that’s derived from satellite imagery.

The China Satellite Manufacturing Index edged up to 48.2 in March from 48.1 in February, according to San Francisco-based SpaceKnow Inc., which analyzes 6,000 industrial facilities using commercial imagery from satellite operators such as Longmont, Colorado-based DigitalGlobe Inc.

The index expresses conditions just like a purchasing managers index, using a 0-100 scale where 50 separates improvement and deterioration. Readings have remained below that dividing line for 16 months.

Corporate Confidence

Market News International’s business confidence indicator remained unchanged at 49.9 in March. The New York-based agency surveys Chinese companies listed on the Shanghai and Shenzhen stock exchanges every month.

"The strains on business have increased with the MNI China Business Sentiment Indicator below 50 for the second consecutive month, something not seen since the global financial crisis." Philip Uglow, chief economist of MNI Indicators, said in an e-mailed statement. "Firms are on balance withstanding the various macro challenges, with looser policy helping."

Sales Mangers

Early data did suggest a leveling out. Confidence of sales managers at medium and large private-sector companies was unchanged at 51.2 this month, compared with 51 in January, according to a survey by World Economics Ltd.

The index remaining near its lowest-ever levels "after a year of rapid slowdown, which implies GDP growth significantly lower than official estimates," the London-based research firm said in a statement. The firm’s employment gauge also was unchanged. "New employment levels in China are now reflecting a reluctance for mangers to hire, almost certainly due to the reduced level of economic growth," the report said.

— With assistance by Xiaoqing Pi

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