Early China Data Show Diverging Views, Stable Growth OutlookBloomberg News
Gauges show manufacturing and smaller businesses strengthened
Picture is slightly dimmer for sales managers and steel sector
The earliest gauges of how China’s economy has fared this month show diverging sentiment among businesses, though the outlook is underpinned by expectations that the expansion will remain broadly steady.
Manufacturing activity tracked by satellites strengthened and confidence at smaller companies improved, according to private indicators for August. The outlook wasn’t as strong in gauges of sales managers and steel mills, which show conditions moderated.
The readings follow official releases for July that showed an across-the-board cooling in factories, investment and consumption. Still, the world’s second-largest economy is holding up well ahead of a key Communist Party Congress later this year, with economists surveyed by Bloomberg projecting a second straight year of 6.7 percent growth.
The first main official indicator for August, the manufacturing purchasing managers index, is due for release Thursday. Economists project it edged down to 51.3 from 51.4 in July, a Bloomberg survey as of Monday shows. Readings above 50 signal improving conditions.
Data released Sunday showed industrial firms maintained a profit surge, underscoring the economy’s resilience even amid slowing factory output and investment. Industrial profits increased 16.5 percent in July from a year earlier, versus the 19.1 percent pace a month earlier, the statistics bureau said.
China Petroleum & Chemical Corp., the world’s biggest oil refiner, posted 40 percent growth in first-half profit Sunday amid better earnings from its chemicals business. China Shenhua Energy Co., the country’s biggest coal miner, said late Friday that profit more than doubled in the first half on higher fuel prices and sales volumes.
Standard Chartered Plc’s Small and Medium Enterprise Confidence Index rose to a four-month high of 57.4 in August, according to the bank’s survey of more than 500 companies. Investment appetite increased, while three key sub-gauges tracking current performance, three-month expectations and credit conditions all posted gains.
"An improving outlook for demand bodes well for production," economists Shen Lan and Ding Shuang wrote in the report on smaller companies. "While financial-market deleveraging has led to higher lending rates, we believe the authorities’ efforts to channel credit to real activity and maintain steady growth are likely to benefit SMEs eventually."
Manufacturing picked up further in August, according to the China Satellite Manufacturing Index, which climbed to 51.2 from 50.4 in July. The gauge published by San Francisco-based SpaceKnow Inc. tracks commercial satellite imagery to gauge activity levels across thousands of industrial sites.
Sentiment among sales managers edged down, according to a survey by London-based World Economics Ltd. The gauge declined to 52.4 in August from 52.8 last month, while a sub-index for prices charged rose to a 40-month high, underscoring the resilience in factory inflation.
"The Chinese economy is maintaining its recent levels of momentum," Chief Executive Officer Ed Jones wrote in a report. However, sales managers aren’t optimistic that business activity will improve in the coming months, and staffing levels showed no growth, he said.
The S&P Global Platts China Steel Sentiment Index slipped to 50.75 this month from 55.32 in July. The gauge is based on a survey of 75 to 90 China-based market participants including traders and steel mills.
"Steel prices have risen so much recently that they feel this could deter appetite for purchasing," Paul Bartholomew, a senior managing editor at S&P in Melbourne, wrote in a report. Still, mills and traders are enjoying high prices and strong margins, and are generally upbeat about market conditions, he said.
— With assistance by Xiaoqing Pi