Business conditions deteriorated to the worst since the beginning of 2009 in April, according to the latest MNI China Business Sentiment Survey.
The MNI China Business Sentiment Indicator, a gauge of current business sentiment, fell for the fourth consecutive month to 48.8 in April from 52.2 in March, leaving confidence in contractionary territory for the first time since the financial crisis. The weakening comes in spite of the recent round of policy loosening implemented by the PBOC. Firms remained relatively more upbeat about the future, with the Future Expectations Indicator holding well above the current measure, giving some hope that the situation may improve.
New Orders and Production have both lost momentum in 2015, and in spite of a pick-up in March, were significantly weaker in April. Both measures are now at the lowest levels in a year, before the government began embarking on a piecemeal stimulus regime through increased infrastructure spending and gradual monetary policy loosening.
Deflationary pressures continued in April, with Input Prices falling further and standing at the lowest sinceJuly 2013, consolidating the plunge in March which wiped out nearly two years of gradual increases in one fell swoop. Over the last year, firms had commented that the aggregate price of their inputs has steadily expanded, primarily due to increased labour costs and the burden from regulations outweighing falls in global prices for commodities.
Prices Received remained near February's six-year low in April, unmoved after increasing marginally in March. Companies were slightly more hawkish in their expectations for future inflation, although the low absolute level of the indicator suggests deflationary pressures are likely to continue in the near future.
"Our panel were unambiguously downbeat in April, painting a sombre outlook for growth in the short-term. Action taken by the authorities to date will take time to come through, although the continued downturn in sentiment suggests that further support will be required," saidPhilip Uglow, Chief Economist of MNI Indicators.
"Balancing the twin goals of maintaining growth close to 7% and pushing ahead with reforms will prove challenging. The good news to date is that so far there are few signs the authorities are abandoning the reform agenda."
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