China SMEI: Activity picked up in December - Standard Chartered

Headline SMEI recovered 0.2pts to 50.6 in December; average reading rebounded to above-50 level in Q4. While services activity improved, performance and expectations sub-indices stayed below 50. Manufacturing SMEs continued to outperform on a solid m/m increase in sales and new orders. Credit conditions remained supportive to SMEs; CNY depreciation expectations increased further, Standard Chartered's Economist Hunter Chan notes.

Services improved, but remained weak

"Our proprietary Small and Medium Enterprise Confidence Index (SMEI; Bloomberg: SCCNSMEI <Index>) picked up to 50.6 in December from 50.4 in November. Both the performance and expectations sub-indices rebounded to expansionary territory as SMEs' manufacturing activity accelerated and services sentiment improved. On average, the headline SMEI edged up 0.7pts from Q3 to 50.6 as the credit environment eased further and the decline in SME business activity ceased."    

"The performance sub-index for manufacturing SMEs rose to an eight-month high in December as sales, production and new orders remained resilient. The sales sub-index for cross-border trading SMEs edged up to its highest reading since April, indicating resilient external demand. We expect the official manufacturing PMI to stay in expansionary territory at 50.2 for a third straight month in December."

"Non-manufacturing SMEs' activity remained soft. While both the performance and expectations sub-indices picked up on improved real estate and construction activity, they stayed in contractionary territory. SMEs in accommodation and catering, retail sales and wholesale, and IT and finance reported a m/m decline in activity. We expect the official non-manufacturing PMI to ease 0.1pts to 49.9 in December."