(Bloomberg) -- China is showing signs of emerging from the slump seen in February, according to a range of the earliest available indicators of the economy, but the strength of the rebound will depend on how other nations fare.

China’s economic data crashed to record lows last month after the government shutdown restricted business and movement nationwide in an attempt to stop the spread of the coronavirus. Now, with new domestic infections at or near zero for more than a week and work resuming, companies are sounding more upbeat about the situation.

An index of eight indicators tracked by Bloomberg rose from its lowest position this month after falling further than initially registered in the final days of February. While that signals a possible bottoming-out of the economy, it underlines the weakness in activity.

Still, confidence at China’s smaller companies rebounded in March from the record low in February, according to a Standard Chartered Plc survey. The underlying data is still downbeat, with new orders and production contracting.

Production continued to face disruptions and is expected to start growing only in the second quarter, according to Standard Chartered., who found that capacity utilization had risen to just 52%, from 42% in February.

“The manufacturing industry gained pace this month and resumed expansion, while all the other industries continued to contract,” Lan Shen and Ding Shuang wrote in the report. “The interruption to operations due to virus containment measures aimed at preventing a resurgence of the epidemic has continued to hurt business.”

The Chinese economy is expected to contract this quarter, and even though there has been some recovery, it “will not be sufficiently rapid to offset the major declines in both manufacturing and services” seen in recent weeks, according to Ed Jones of World Economics, which publishes a survey of sales managers.

Confidence at Small Chinese Firms Rebounds But Still Not Strong

In February’s purchasing manager data, export orders were even weaker than the overall picture of manufacturing, and with the spread of the virus in China’s main export markets of Europe and the U.S., that situation may continue for some time. If it does, then the recovery in confidence in China may not only be weak, but short-lived.

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Early South Korea trade figures for March showed a surprising 10% rise in exports, but that had more to do with the calendar than any unexpected strength in sales abroad.

There were more working days in the first 20 days of this month compared to March last year, which boosted the total value of shipments. The average daily value of Korean exports actually dropped slightly. With Japan likely in recession, the U.S. and Europe battling rising coronavirus cases, and China still not back at a normal levels, that strength is unlikely to continue.

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The return of factory deflation will also undercut businesses, as lower prices mean lower profits. The Bloomberg inflation tracker is at the lowest level since 2016, when China was coming out of an extended period of deflation that drove down prices globally. The collapse of oil prices and weak demand across the world due to the outbreak will only exacerbate this trend.

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Chinese stocks have avoided some of the turmoil seen in overseas markets, with the benchmark index of 300 companies down just 9% this year, and an index tracking real-estate companies down 15%. That compares to more than 20% for the Dow Jones or S&P 500 in the U.S. or the FTSE 100 or DAX indexes in Europe.

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The price of copper, which is considered a barometer of global growth as it’s essential for electronics, cars, and construction, plunged on Tuesday to the lowest in four years, even as the Federal Reserve announced a second wave of initiatives to support a shuttered U.S. economy.

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.