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China business sentiment hits 1-year high on surge in new orders, improving demand

Business sentiments in China surged to a one-year high during the month of September, helped by rise in manufacturing orders, besides improvement in demand across the country.

The MNI China Business Sentiment Indicator, a gauge of current business sentiment, rose 3.1 percent to 55.8 in September from a revised 54.1 in August, leaving confidence at the highest level since August 2015. New Orders, a key signal of business demand, rose to 59.5 in September from 56.3 in August, the highest since July. Companies also expanded their inventory holdings amid expectations of higher demand.

In particular, there was a slight pullback in output and hiring intentions, with the Employment Indicator falling to the 50 threshold in September. Moreover, credit was slightly less abundant in September with the indicator declining marginally to 52.1 from 52.6 in August.

Meanwhile, costs of raw materials eased again in September. The Input Prices Indicator fell to the lowest since November 2015, bringing some relief to companies which have struggled to raise the prices of their own goods and services due in part to sluggish demand and overcapacity.

"While the outlook remains challenging, our forward-looking activity indicators suggest that growth momentum is likely to continue into the final quarter of the year, supported by a continuation of policy easing," said Andy Wu, Senior Economist, MNI Indicators.

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