Confidence among Chinese companies remains subdued in February
Staff Writer |
Chinese companies are generally optimistic that business activity and new order inflows will increase over the next 12 months, according to the latest IHS Markit Business Outlook survey data.
Article continues below
That said, overall sentiment was unchanged from October’s survey and remains lacklustre in the context of historical data.
Consequently, corporate earnings forecasts are littlechanged from last autumn, while firms anticipate only a slight rise in workforce numbers.
Input cost inflation is meanwhile set to soften, but still expected to outpace the overall increase in output prices.
On a sector basis, sentiment among manufacturing firms regarding future output edged up to its highest for one year.
This is despite revising down their expectations for new order growth to their lowest since June 2016.
Meanwhile, confidence at services companies towards future activity growth is fractionally weaker and the lowest since October 2016, despite firms expressing the strongest degree of optimism regarding future new orders for a year.
Positive expectations are generally underpinned by forecasts of stable market conditions, supportive government policies, greater R&D efforts and strong client demand.
However, changes in the value of the renminbi are perceived as both a threat and an opportunity to the outlook.
At the same time, increased market competition, capital shortages, government policies (more specifically around environmental protection) and unstable raw material costs were all factors weighing on sentiment.
Employment across China is set to increase over the next 12 months.
The overall expansion in staffing levels is forecast to be marginal overall, despite firms anticipating increasing payrolls at the quickest pace for one year.
Service providers are planning to raise employment to a slightly greater extent than manufacturers.
Chinese businesses expect to increase capital expenditure over the coming year.
Furthermore, sentiment regarding capex plans strengthened to the highest since last February, underpinned by improved optimism at manufacturers.
Capex forecasts at service providers are meanwhile unchanged from the previous survey period.
Companies anticipate a slower rise in their cost burdens over the coming year.
Notably, input prices are set to increase at a slightly softer pace across both the manufacturing and service sectors.
Goods producers continue to forecast the stronger rate of inflation amid reports of unstable raw material costs.
In line with higher anticipated costs, firms plan to raise their output charges over the year ahead.
While manufacturers expect to raise their selling prices to the greatest extent for one year, charges set by services companies are projected to rise at the same pace as had been planned last October.
That said, the expected increases in output charges are forecast to remain slower than that for input costs in both monitored sectors, with a number of panellists commenting on competitive market pressures.
Subdued growth forecasts for activity and new orders led Chinese firms to leave their business revenue projections unchanged in February.
Consequently, expectations regarding future profitability were littlechanged from that seen in the prior two survey periods.
However, manufacturers are more cautious than service providers, with the latter noting a higher net balance of firms anticipating greater profits. ■