The Sales Managers’ Index: China

Chinese business activity registered a slower pace in February

• Business Confidence high and steady
• Prices continue to fall
• Payrolls growth effectively unchanged

The Headline Sales Managers’ Index reflected solid economic growth in the Chinese economy in February registering a value of 54.7 percent, down by 0.8 percent on the previous month. The China Headline Index is designed to reflect overall economic growth, bringing together the average movement of Confidence, Market Expansion, Product Sales, Prices Charged and the Staffing Indices.

This index has averaged 55.4 percent since August 2014 which indicates that economic activity as reported by the panellists has remained strong and stable in China for several months. A reading above 50 percent indicates that economic activity is generally expanding; below 50 percent indicates that it is generally contracting.

The Sales Managers’ Index is the first monthly economic activity index released covering all private sectors of the Chinese economy. Sector analysis for February shows that the headline Manufacturing SMI was down slightly on the previous month registering a value of 56.4 percent in February. This is the second month in succession that the index decreased but remained strong and stable. The Services SMI Index in February fell by 0.8 percent to 53.4, the first monthly fall to below 54 percent. Panellists are experiencing steady growth in this sector, although at a slightly lower rate.

Business Confidence has been high in both sectors of the Chinese economy. Confidence measures how Sales Managers’ expect the economy as a whole to perform over the coming months and provides a valuable sentiment insight as confidence has a knock on effect for jobs and sales growth.

The combined Business Confidence Index value registered for the Business Confidence Index among panellists in February was 58.5, down 0.9 on January’s level. This index has averaged 59.3 since August of last year indicating that panellists are reporting a stable and high level of Business Confidence about future economic conditions. This optimism was underpinned by the Index value for Market Growth in February which fell by 0.8 percent from its value the previous month to register a value of 55.0 percent. This is the third consecutive monthly fall. Nevertheless, at this level it indicates that panellists are still experiencing sturdy growth in the markets they operate in although at a slowly declining rate compared with last year.

Strong growth was also registered in the Product Sales Index which represents sales made by panellists’ own companies. The February Index for Product Sales was 57.9 percent, down -1.0 percent on the month before. This index has averaged 58.6 percent over the last twelve months indicating that panellists have experienced high and stable sales growth for some time.

Despite continuing growth the Prices Charged index in February registered a value of 49.0 percent, down by 0.7 percent on January. For the third consecutive month this index has been below the 50.0 no change level indicating that there is a continuing downward level on prices. The expectation of rising sales has held up employment growth and the Staffing Index reached 53.2 percent in February, down slightly by 0.5 percent on its January level, the second monthly marginal fall. This indicates that panellists are increasing payrolls to meet sales growth.

In answer to a special question posed to panellists in February, 17.6% of Chinese Sales Managers’ now believe the valuation of the Yuan is negatively affecting their business. This reflects the steady weakening of the Chinese currency as reported in this month’s World Price Index (WPI), a monthly evaluation by World Economics of the purchasing power parity value of the world’s major currencies.

Summary
World Economics Chief Executive Ed Jones commented:
“The Headline SMI Index was down slightly in February with Manufacturing and Service sectors following the same slowing trend. Prices have also continued to fall while payroll growth has remained stable.”