Hong Kong business conditions continue to worsen as key economic index falls for fifth month in a row
Purchasing managers' index declines to 48.2 as companies say their clients are unwilling to spend money and fewer tourists arrive in city
Hong Kong's private business sector contracted for the fifth month in a row last month on downward demand, leading to fewer jobs, according to a key economic index.
The Nikkei/Markit Hong Kong purchasing managers' index (PMI), which gauges business conditions in the private sector, including manufacturing, services, retail and construction, dropped to 48.2 last month, down from 49.2 in June.
A PMI of more than 50 means the economy is expanding and below means contraction. Markit said the latest figure for Hong Kong meant "further deterioration" in the business sector. The 300 plus companies who responded to the survey said this was due to clients who were not very willing to spend money, and fewer tourists coming to the city.
Annabel Fiddes, an economist at Markit, said the downward trend may continue.
"Looking ahead, the PMI data suggest Hong Kong's economy may struggle to get back into expansionary mode, as companies continued to cut staff numbers while reducing their inventories at the quickest rate since 2011," she said.
"Moreover, firms suffered a further marked fall in new business from mainland China, which continues to weigh heavily on overall new orders."
A recent Legislative Council research report echoes the problem with tourists, saying the number coming to Hong Kong isn't growing as much as it used to, and the people who are coming aren't spending as much.
The Legco report recommended trying to attract more business travellers, because they tend to spend more on hotels and shopping. It also says that Hong Kong hasn't done as much as the likes of Singapore and Seoul to attract business travellers, conventions and exhibitions.
The Nikkei/Markit report notes that the employment rate in the private sector continued to fall, which has been the case for more than a year. Some of the respondents said it was because companies were cutting staff numbers and not replacing employees who quit.
Gary Luk, business development director of workforce solutions company Kelly Services in Hong Kong, said there were a lot of jobs in the Hong Kong market, but the problem was finding the right people. He said there were a lot of contracting jobs in the private sector, which were being shunned by many jobseekers.
"The market is going that way, like in IT and banks," Luk said.
The latest figure might sound bad, but it's been much worse in the past. The 2008 and 2009 recession was by far the worst time for the local economy, with the index falling below 40.
Looking ahead, Ines Lam, research associate at brokerage CLSA, said she expected the mainland economy to start stabilising and that would be good for Hong Kong given the close links between the two economies.
She added that although the slow growth in the number of mainland tourists wasn't good for retailers here, continuing purchases by Hongkongers would keep the economy strong for the rest of the year.
