Confidence at five month high amid better credit conditions
Business confidence rose to a five month high in May, a possible indication that some of the mini-stimulus measures announced in early April could be feeding through to the economy, amid evidence that our survey panel is finding it easier to obtain credit.
The MNI China Business Indicator rose to 53.7 in May from 51.1 in April, the highest since December 2013. If sustained into June, it points to an improvement in the second quarter from the one and half year low in the first quarter, providing a tentative indication of a stabilisation in GDP growth.
Other data within the report provides evidence of a general pick-up, with Production and New Orders increasing. Availability of credit, which rose to the highest level for four years, contrasts with other reports that suggest a tightening in credit conditions, and has continued to improve since the end of last year.
Firms complained of higher costs which have risen due to the firmer oil price and the depreciation in the yuan. The Input Prices indicator increased to the highest level since June 2012, but Prices Received fell below the breakeven 50 level in May, increasing the price squeeze on companies.
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Companies have benefited from the weaker exchange rate. The Effect of the Yuan Exchange Rate Indicator rose above 50 for the first time since September 2012.
Commenting on the data, Chief Economist of MNI Indicators Philip Uglow said: “While the authorities have been keen to play down the possibility of unleashing a large stimulus package, the rise in credit availability and the more positive tone of the report suggests that government efforts to stabilise growth could be having an impact.”