In December, the Small and Medium Enterprise Confidence Index (SMEI) saw a slight uptick, rising by 0.2 points to sit at 50.6. This improvement helped push the average reading for the fourth quarter back above the 50-mark. While there’s been some progress in the services sector, both current performance and future expectations in this area remain below 50. Manufacturing SMEs, on the other hand, continue to show stronger performance, with notable month-over-month increases in sales and new orders. The credit landscape remains favorable for SMEs, and expectations around the depreciation of the Chinese Yuan (CNY) have seen further growth, according to insights from Hunter Chan, an economist with Standard Chartered.
Looking at services, there are signs of improvement, yet challenges persist. “Our exclusive SME Confidence Index climbed to 50.6 in December, up from 50.4 in November. This was driven by rebounds in both performance and expectations sub-indices, reflecting enhancements in manufacturing and a more optimistic outlook in services. Overall, the headline SMEI rose by an average of 0.7 points from the third quarter, reaching 50.6. This comes as the credit environment eased and the decline in business activity among SMEs has halted.”
In manufacturing, the performance sub-index for SMEs hit an eight-month high in December. Sales, production, and new orders have shown resilience, and the sales sub-index for SMEs involved in cross-border trade reached its highest level since April, suggesting strong external demand. It is anticipated that the official manufacturing PMI will maintain its position in the expansionary zone at 50.2 for the third consecutive month in December.
Meanwhile, activity among non-manufacturing SMEs remains tepid. Both performance and expectations indices have shown some improvement, particularly with gains in real estate and construction, but they continue to reside in contraction territory. SMEs in sectors like accommodation, catering, retail, wholesale, IT, and finance reported month-on-month declines in activity. Forecasts suggest a slight drop in the official non-manufacturing PMI by 0.1 points to 49.9 in December.
