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Earliest China Economy Data Show Little Cheer, Little Change

  • Minxin PMI slips and MNI business confidence reading drops
  • Sales managers’ confidence perks up and internet searches rise

After something of a roller-coaster ride in March and April, China settled into sluggish growth in May, according to the earliest batch of private indicators tracking the world’s second-largest economy.

The Minxin manufacturing index from the China Academy of New Supply-side Economics, Market News International’s business confidence indicator and Standard Chartered Plc’s small-business gauge all retreated. On the brighter side, sales managers saw stronger activity, a manufacturing gauge based on satellite images rose a second month, and there was an uptick in internet searches related to smaller businesses.

QuickTake China's Pain Points

The mixed bag follows official data for April that dashed hopes for a sustained upswing in growth after a post lunar-new-year holiday rebound in March. The key May indicators for new credit, industrial production, fixed-asset investment and retail sales are expected in mid-June, after the official purchasing managers index for manufacturing on June 1. That PMI probably fell to 50 for May from 50.1 the prior month, according to a Bloomberg survey of economists.

The tepid signs thus far for May activity coincide with signals from policy makers that they want to keep a lid on rising debt, even if such restraint caps an economic rebound.

Here’s what the earliest economic data show for this month:

Minxin Indexes:

Minxin’s manufacturing PMI declined to 45.8 in May from 46.9 in April. Services looked better, with the non-manufacturing PMI increasing to 44.4 from 44.2 in April. Readings above 50 signal conditions are improving and those below indicate deterioration.

Minsheng Bank and the academy compile the readings from a monthly survey of more than 4,000 companies, 70 percent of which are smaller enterprises.

Executive Sentiment

Market News International’s business confidence indicator showed the same proportion of companies reporting an improvement in business conditions as those who saw a deterioration. The gauge fell to the break-even level of 50 in May from 50.5 in April.

"Measures of credit availability in the survey show that looser policy is flowing through to companies on our panel, although it’s having only a limited impact on the real economy metrics of output and orders," Philip Uglow, chief economist of MNI Indicators, said in a statement.

New Orders held on to most of last month’s rise with a 54.6 reading compared with 55.8 in April. Firms were more optimistic about the next three months, with expectations for orders and output rising to the highest levels since October 2015, MNI’s report said.

"Overall, we believe growth momentum has continued to lose steam in May, with monetary policy easing becoming more cautious," Yang Zhao, chief China economist at Nomura Holdings Inc. in Hong Kong, wrote in a report on the MNI gauge.

A separate MNI gauge released Wednesday showed the mood of consumers darkening. A consumer sentiment survey released by MNI and Westpac Banking Corp. fell a second month, dropping to 114.2 in May from 117.8 in April. Readings above 100 indicate more positive sentiment than negative. Separate gauges of expectations for personal finances, business conditions and durable goods buying conditions also declined.

Small Enterprises

Standard Chartered’s Small and Medium Enterprise Confidence Index fell to 56 in May from 58.7 in April. An index of growth momentum, which measures the difference between new orders and finished-goods inventory, moderated, the London-based bank said.

The labor market also appeared to have softened slightly in May. The bank’s employment reading fell to 53.0 from 55.8 in April.

Sales Managers

Sales managers reported stronger activity. Confidence of managers at private-sector companies rose to 51.6, the highest since December, according to London-based research firm World Economics Ltd. Sales growth and market growth also increased, while business confidence rose for a second month and prices charged climbed for a fourth month.

"The upward trend is certainly there," Chief Executive Ed Jones said. "When we look at the underlying data, everything in all indexes have improved, staffing levels, business confidence and of course sales – which is an important measure of output."

Satellite View

The China Satellite Manufacturing Index rose slightly to 48.34 in May, the highest level of this year, from 48.17 in April, according to San Francisco-based SpaceKnow Inc., which analyzes thousands of industrial facilities using commercial satellite imagery. Still, the indicator hasn’t been above 50 since November 2014.

Search Gauge

Baidu Inc.’s index of how often its search engine serves up queries about small- and medium-sized companies rose to the highest since January. The preliminary reading of an index from the Beijing-based company increased to 99.9 in May from 99.8 in April. The dividing line between positive and negative readings is 100.

— With assistance by Jeff Kearns

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