Photographer: Wang He/Getty Images

Early China Data Show Economy on Firmer Footing in December

  • Satellite activity gauge stabilizes near a five-year high
  • The mood among executives was the brightest in two years

China’s economy is closing out the year on a high note as the earliest December indicators show no sign expansion is faltering after three straight quarters of 6.7 percent growth.

Large and small firms reported stronger momentum, private surveys show. The mood among executives was the best since August 2014. Sales managers had a stable outlook, even as conditions at factories and steelmakers edged down.

Two years of monetary easing and fiscal stimulus have helped the world’s second-largest economy prove bears wrong. The expansion picked up to about 7 percent last month, according to a monthly tracker from Bloomberg Intelligence. Policy makers this month pledged prudent and neutral monetary policy and greater focus on deflating asset bubbles as they work to ensure stability in the lead up to a key party congress late next year.

A report Tuesday showed industrial profit gains accelerated in November, led by raw material producers, as prices of products such as coal and metals continued to advance. Earnings rose 14.5 percent in November from a year earlier, the statistics bureau said.

Here are what the earliest indicators show:

Smaller Businesses

Standard Chartered Plc’s Small and Medium Enterprise Confidence Index rose to an eight-month high of 56.1 this month from 55 in November. Numbers above 50 indicate improving conditions. While credit conditions improved, a gauge of expectations weakened, Shen Lan, a Beijing-based China economist, wrote in a report. Companies expect the yuan to keep falling.

"Sales accelerated in December, boosting production activity," wrote Shen, who projects 6.8 percent growth this year. "The momentum may not be sustainable, however."

Large Companies

The mood among executives improved, according to the Market News International China Business Sentiment Indicator, which rose to a two-year high of 55.9. The index is based on a survey of executives of companies listed on the Shanghai and Shenzhen stock exchanges.

Companies reported that the weakening yuan has positive effects on their businesses, while that boost has eased this month from November, according to a sub-gauge of the indicator.

"December’s survey signals a positive end to a choppy year," Andy Wu, a senior economist at MNI Indicators in Beijing, wrote in a report. "But we shouldn’t get too carried away as the country still has plenty of economic problems."

Sales Managers

A survey-based gauge of sales manager sentiment from World Economics Ltd. remained unchanged at 51.2. The December Sales Managers’ Index "shows continuing growth, but whole-year data for 2016 confirms a significant fall in activity compared with previous years," the London-based research firm said in a statement.

Businesses reported faster cost increases. The impact on profit margins has been minimal, though increasing labor, land and transport costs are a mounting concern, the firm said.

Satellite View

The China Satellite Manufacturing Index edged down to 51 this month from a five-year high of 51.4 in November, according to San Francisco-based SpaceKnow Inc., which uses commercial satellite imagery to monitor activity across thousands of industrial sites.

Steel Jump

The S&P Global Platts China Steel Sentiment Index declined to 52.62 this month from 59.37 in November as conditions weakened slightly. The gauge is based on a survey of about 75 to 90 China-based market participants including traders and steel mills.

“It’s down a bit this month but still fairly strong," Paul Bartholomew, a senior managing editor at S&P Global Platts in Melbourne, wrote in an e-mail. "The market has been moving so quickly that many mills and traders are unsure about future price direction but are endeavoring to keep prices as high as possible in December."

(An earlier version of this story was corrected to show Standard Chartered gauge was at an eight-month high.)

— With assistance by Xiaoqing Pi

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