China business sentiment sinks in January on back of sharp drop in production and new orders

This is the lowest since October.

Business sentiment among China’s largest companies fell at the beginning of 2015, led by significant declines in output and orders.

The MNI China Business Indicator fell to 53.7 in January from 56.2 in December, the first monthly drop in three months.

Overall sentiment is now at the lowest since October, before the People’s Bank of China cut its benchmark deposit and lending rates to stimulate economic activity.

December saw the Production and New Orders Indicators hit three and four year highs respectively, boosted by the approval of over $100 billion in infrastructure projects in October.

The impact waned in January with both measures falling by just under 10% on the month. In spite of the latest fall, both indicators remained well above the breakeven 50 level and also above the 2014 average. This contrasts with the MNI China Business Indicator which is now slightly below it.

“While the January data marked a disappointing start to the year, the latest fall followed significant strength towards the end of 2014 on the back of infrastructure spending and the rate cut. Trend growth in overall sentiment, orders and production still remains above last year’s levels,” said Philip Uglow, Chief Economist of MNI Indicators.