China business sentiment falls to 5-month low on sharp decline in short-term manufacturing outlook

Business sentiment in China fell to a five-month low during the period of October, following a sharp decline in the short-term manufacturing outlook of the country.

The MNI China Business Sentiment Indicator, a gauge of current business sentiment, scaled back notably in October, falling 6.5 percent to 52.2 from 55.8 in September and leaving confidence at the lowest level since May.

The decline was led by lower confidence among manufacturing companies. There was an even sharper decline in firms’ short-term outlook, with the Future Expectations Indicator falling to 52.0 in October from 58.0 in September, the lowest since April 2016.

Disinflationary pressures on the output side were slightly more evident in October, with the Prices Received Indicator falling further into contraction.  This came alongside a rise in prices of raw materials, with upward pressure on the Input Prices Indicator coming from both the manufacturing and service sectors.

"Following some resilience towards the end of the third quarter, the pullback in the MNI China Business Sentiment Indicator marked a disappointing start to the final quarter of the year. Companies are now less optimistic about future business conditions than current conditions, a warning that the macro climate will likely remain uncertain in the near term," said Andy Wu, Senior Economist, MNI Indicators.