There has been a profound change in Business Confidence in China over the last month, with the All-Sector Index falling to the lowest level ever recorded by the Sales Managers Survey in the decade over which the survey has been running continuously.
Business Confidence in the Service Sector is similarly at an all time survey low, with Confidence now well below the levels recorded at the time of the first outbreak of Covid In Manufacturing, the Confidence Index is slightly higher, but still at a 34 month low. Almost all component Indexes in both the Manufacturing and Service Sectors are now below the 50 level, indicating that business activity fell sharply in December.
China Business Confidence Plunges in December
Diffusion Index. (50 = 'No Change')
As China has unquestionably been the worlds biggest growth engine over the past 20+ years, even a slowdown in activity close to the zero mark, let alone a major recession, will inevitably reverberate around the world, and is likely to bring down growth rates in many countries.
In summary, the survey suggests strongly that the growth rate of the Chinese economy has slowed quite dramatically, and may be heading for recession in 2023.
The lights may not have gone out, but prospects for economic growth in 2023 have certainly dimmed.
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