The headline SMEI rebounded to 50.4 in July on a rebound in expectations and credit conditions. The productivity subindex remained in contractionary territory for a second month as services dragged on. Manufacturing activity picked up, while real estate, construction, finance, retail and food services fell, Standard Chartered economists Hunter Chan and Shuang Ding noted.

Services remain a key burden

“Our headline SMEI rebounded to 50.4 in July from 49.9 in June, returning to expansionary territory after a one-month decline, largely due to improved expectations and credit conditions. Meanwhile, the productivity sub-index remained below 50 for a second straight month at 49.7. Our growth momentum indicator fell further as the finished goods inventories sub-index rebounded more than new orders.”

“Manufacturing SMEs reported faster production activity and growth in sales and new orders, lifting the manufacturing productivity index to 51.3 in July from a drop to 49.8 in June. Meanwhile, labour-intensive industrial activity declined. External demand weakened as the new export orders index fell below 50.”

“The services performance sub-index improved by just 0.3 points to 49.3 in July as sales fell further. Real estate, construction, retail and wholesale remained the main drags. SMEs in the accommodation and catering sector again reported weak sales and new orders. Credit and liquidity conditions for SMEs improved slightly as banks continued to provide support and surplus cash in SMEs increased.”