China’s output expectations at lowest levels since pandemic: Report




The outlook for the coming year regarding business activity in China is not positive due to worries about future COVID-19 outbreaks, the effect of lengthy containment rules, and increasing costs. This has caused companies to expect staffing levels to decline over the next year. Firms also predict non-staff costs to surge at a faster rate than staff costs. 

As output price inflation is set to go down, top firms will be revising profitability projections, as per the latest S&P Global China Business Outlook survey. After an 8-year high of +32 per cent in February, the net balance of Chinese companies that anticipated higher output in the next 12 months went down to +18 per cent in June. This indicated the lowest optimism since February 2020 and was below the long-run series trend of +26 per cent. Business confidence in China was also a bit lower than the same on a global level (+22 per cent). 

The outlook for the coming year regarding business activity in China is not positive due to worries about future COVID-19 outbreaks, the effect of lengthy containment rules, and increasing costs. This has caused companies to expect staffing levels to decline over the next year. Firms also predict non-staff costs to surge at a faster rate than staff costs.

Increasing costs and the Russia-Ukraine war had an adverse impact on growth predictions in June. Companies also said that an improved pandemic situation could accelerate a robust recovery of activity levels and reduce strain on supply chains. Supportive government taxation policy and higher investments will help push economic growth. 

Moreover, the dip in confidence related to future output was influenced by falls across both the manufacturing and service sectors, with the respective net balances reducing from +26 per cent to +17 per cent and +36 per cent to +19 per cent, respectively. 

Despite a slight rise in employment levels during February (net balance of +7 per cent), firms forecast that workforce figures will remain the same over the next year with both manufacturers and service providers marking a neutral net balance of 0 per cent, according to the report.

Although Chinese businesses continued to predict greater input costs in the year ahead, the staff costs net balance slipped from +24 per cent in February to +12 per cent in June. In contrast, firms projected a slightly stronger rise in non-staff costs (net balance of +22 per cent in June, up from +20 per cent). 

For the Global Business Outlook Survey for worldwide manufacturing and services, 12,000 manufacturers and service providers are asked about their take on future business conditions. The reports are created on a tri-annual basis, with data gathered in February, June, and October. Data is collected via questionnaires three times a year at four-month intervals. The current report takes into consideration responses from around 8,000 firms.

Fibre2Fashion News Desk (NB)





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