(Bloomberg) -- China’s economy continued its slow recovery from the coronavirus slump in June, with a better performance in the services sector and among smaller companies tempered by the still-grim global outlook.
That’s the assessment from the earliest available indicators, which showed the economy continuing to strengthen, after a big pickup in May. The final result last month was stronger than initially seen, due to growth in the services sector, according to the purchasing manager indexes.
The outlook fir smaller firms continued rising in June, according to a Standard Chartered Plc survey of companies, with indexes tracking confidence, outlook and new orders at their highest since the coronavirus shutdown.
“Sales grew rapidly, mainly on stronger domestic demand,” according to Standard Chartered Economists Shen Lan and Ding Shuang. “Production activity picked up, with capacity usage accelerating and hiring increasing mildly.”
However, overseas orders continued to decline for those smaller companies. That confirms a trend also seen in the weak trade with South Korea in the first 20 days of the month -- a leading indicator of export demand.
New export orders to smaller firms are still contracting, albeit at a slower pace, according to the Standard Chartered survey of more than 500 small firms. The index improved to 49.8 from 47.4 in April, with a number under 50 indicating a contraction.
Deflation in producer prices also slowed somewhat. If that trend continues, it could mitigate declines in company profitability.
Stocks and commodity markets rebounded over the past month after disappointment with the stimulus announced in late May at the National People’s Congress. Metal markets have been rising both on supply problems caused by the coronavirus, and rising demand in China.
Stock markets globally have risen this month, and the domestic Chinese markets also resumed their climb after dropping in late May.
Note on Early Indicator construction
Bloomberg Economics generates the overall activity reading by aggregating the three-month weighted average of the monthly changes of eight indicators, which are based on business surveys or market prices.
- Major onshore stocks - CSI 300 index of A-share stocks listed in Shanghai or Shenzhen
- Key property stocks - All the constituents of CSI 300 Index that are in the real estate industry
- Iron ore prices - Spot price of iron ore for shipment to Qingdao port (dollar/metric tonne)
- Copper prices - Spot price for refined copper in Shanghai market (yuan/metric tonne)
- South Korean exports - South Korean exports in the first 20 days of each month
- Factory inflation tracker - Bloomberg Economics created tracker for Chinese producer prices
- Small and medium-sized business confidence - Survey of companies conducted by Standard Chartered Bank
- Sales manager sentiment - Survey of sales managers in Chinese companies by World Economics Ltd.
©2020 Bloomberg L.P.
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