Hong Kong’s private sector downturn continues as PMI falls again

The Nikkei Hong Kong Purchasing Managers’ Index fell to 48.2 in October from 49.3 in September and 49 in August

PUBLISHED : Thursday, 03 November, 2016, 1:50pm
UPDATED : Thursday, 03 November, 2016, 10:33pm

October saw Hong Kong’s private sector decline with the sharpest pace since August after signs of a rebound in August and September, stoking fears over market contraction as the city entered the final quarter of the year.

The Nikkei Hong Kong Purchasing Managers’ Index fell to 48.2 in October from 49.3 in September and 49 in August. A figure below 50 signals a contraction and above it means expansion. The index gauges private sector business conditions including manufacturing, services, retail and construction.

The number has now fallen below 50 for the 20th consecutive month.

Key Hong Kong economic index for August shows worst of downturn may be over

“Unless we see evidence of stronger client demand in the coming months, the private sector is unlikely to lift itself out of the current downturn,” said Bernard Aw, economist at IHS Markit, which compiled the data.

IHS Markit said the lower PMI figure could be attributed to weaker domestic output and new orders, coupled by an accelerated decline in new business from mainland China.

It added Hong Kong firms remained reluctant to hire more workers amid rising staff costs and a worsening business environment.

While input cost inflation continued for the fourth straight month, the rate was more gradual as a drop in purchasing prices eased inflationary pressure.

Key market indicator: Hong Kong private sector still sluggish

HSBC greater China economist Julia Wang said the fresh data highlighted the persistent headwinds Hong Kong faces on both the domestic and external fronts.

She added a 25 basis point rise for the US Federal Reserve rate expected next month will further impact the Hong Kong market.

“As a Fed rate hike becomes more imminent, this could exert further pressure on Hong Kong’s property market, and in turn weigh on private consumption,” Wang said.

The PMI is derived from indexes of about 300 companies that measure changes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased.