Business Confidence in the Chinese economy (at a decadal high in July) fell back somewhat in August, but remains much higher than in the USA, and roughly on a par with India. Confidence remains higher in the Chinese services sector than in Manufacturing, although the figures for the two sectors are much closer than was the case previously.
The Business Confidence Index is particularly important as the question asked of panel members relates to their confidence in the future course of business activity, not its present level. Sales Managers, because of the very nature of their work tend to be more attuned to the future. They are in general very aware of levels of contracts they expect to be signed shortly, as well as current order books, with the potential personal impact of likely sales levels on bonuses linked to sales. Economists often refer to levels of Business Confidence as "animal spirits", reflecting the great importance of Confidence on future levels of investment and employment.
The overall message regarding the Chinese economy must remain one of cautious optimism, as Manufacturing data remains subdued. However, the overall Sales Managers Index and is registering growth (Index readings of over 50, the level distinguishing economic growth from recession) albeit of a modest nature. Growth looks likely to be led by the Services sector, judging by the rising Business Confidence Index, probably reflecting the progress of the Chinese economy towards a more western style balance between the Manufacturing and Services sectors.
The big question remains: can the world's great growth engine of the past three decades move back towards its previously central role in sponsoring global economic expansion. Or will tariff wars with the USA keep China's growth and its influence on the world economy more restricted than has been the case for many years. On balance, recent Sales Managers Survey data (particularly the forward-looking Confidence data) suggests that the Chinese economy is moving back towards providing a leading role in expanding global economic activity. But the movement is slow and a little erratic.
The Sales Managers' Indexes provide the earliest monthly data on the speed and direction of economic activity in key growth areas of the world.
The SMI’s (Sales Managers’ Indexes) are compiled and analysed by World Economics and are based on survey data collected from a panel of companies stratifying all Industry Classification Board (ICB) sectors which are weighted to reflect their contribution to national Gross Domestic Product.
Key advantages of the SMI's:
SMI data for China is published as diffusion indexes to gauge the speed and direction of economic activity.
Monthly data since 2013 is downloadable for all-sectors, manufacturing and service sectors separatly in a consistent unadjusted format for 6 key indexes: