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October 21, 2009

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Home » Business » Economy

Confidence in city's business climate on rise

BUSINESS confidence in Shanghai strengthened in the third quarter, and consumer prices declined at a slower pace last month, raising new optimism that the city's economic recovery remained on track.

Shanghai's Business Confidence Index reached 115.4 in the July-September period, up from 101.6 in the second quarter, the Shanghai Statistics Bureau said yesterday. A reading above 100 indicates an expansion. The index is based on interviews with company executives.

The separate Business Climate Index gained 10.4 points from the previous three months to hit 120.9 in the third quarter. It was the measure's first rise above 120, a threshold for relative prosperity, since the fourth quarter of last year. That index is based on orders, industrial output and other indicators.

"Business sentiment in the city has experienced great improvement," said Wang Zehua, a bureau analyst. "Despite weak exports, people have growing confidence in the city's economic recovery."

He estimated that the indexes will continue to expand for the rest of the year, although some experts are still worried about contractions in exports.

Overseas shipments in Shanghai dropped 14.7 percent last month from a year earlier. But it was the smallest retreat so far this year and compared with a loss of 24.7 percent in August.

The rise in confidence resulted partly from a robust property market. The real estate portion of the business climate index gained 143.1 in the third quarter, the highest among all sectors.

The industrial portion of the index rebounded to 119.2 in the third quarter, up sharply from a record low of 92 in the fourth quarter of last year when the global financial crisis started.

Meanwhile, declines in the city's consumer prices and producer prices moderated last month, reducing deflationary pressure that could threaten the economic recovery if people delayed purchases and waited for prices to fall further.

Growing demand

The Consumer Price Index in Shanghai slipped 0.5 percent on an annual basis last month, compared with drops of 0.6 percent in August and 1.9 percent in July.

The Producer Price Index, which measures prices at the factory gate, fell 6.9 percent last month from a year earlier. The index, which is considered a harbinger of future consumer prices, narrowed from a contraction of 8.1 percent in August.

"Consumer prices may turn positive before the year's end, a sign of growing demand in the city," said Li Maoyu, an analyst at the Changjiang Securities Co.

The figures released yesterday were consistent with last week's reports showing strong growth in local investment and retail sales.


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