image image

Hong Kong economy

Hong Kong private sector grows for third straight month, key index shows

Despite ending the year on a positive note, analysts warn local companies to brace for rough economic times ahead

PUBLISHED : Tuesday, 05 December, 2017, 3:49pm
UPDATED : Tuesday, 05 December, 2017, 9:44pm

Hong Kong’s private sector showed positive growth for the third straight month, according to a key economic indicator released on Tuesday, but the future business outlook looked gloomy.

The Nikkei Hong Kong Purchasing Managers’ Index gauges private sector business conditions including manufacturing, services, retail and construction.

A score of 50 or above signals growth in the economy, while anything below reflects decline. The rate of growth or contraction is shown by how far the figure deviates from the median of 50.

Hongkongers most confident of economy in three years, survey finds

The index rose to 50.7 in November, up from 50.3 in October, but down from September’s reading of 51.2.

However, the report noted that November’s figure “remained below the historical average”.

The index is calculated from a monthly poll of executives from more than 300 companies in the city to gauge sentiment in the city’s private sector.

“Hong Kong’s private sector economy is on course to end the year on a positive note, with November PMI data indicating a pickup in growth momentum,” Bernard Aw, principal economist at UK-based analytics firm IHS Markit, said.

But despite the upbeat November data, Aw forecasted a gloomy economic future for local firms.

“Apart from lower sales, companies continued to face an ongoing squeeze on profit margins, which will, in turn, dampen employment prospects and capital investment growth.”

Exports and domestic demand drive another quarter of strong growth for Hong Kong economy

Fewer construction projects and high competition were blamed for new orders falling for the second straight month.

Weak domestic demand also pulled down sales figures for companies.

But there were several positive economic indicators including, a stable employment level in November, as well as a sharp increased in purchasing activity by companies.

New orders from the mainland – which grew for the first time in three months – also helped business activity.

“The pace of inventory accumulation was the strongest since July and one of the fastest for over 16 years,” the report said.

Hong Kong has seen positive economic indicators across multiple sectors in recent months.

The city’s retail sector posted its eighth consecutive month of growth, posting a 3.9 per cent increase in October.

China’s richest 2,130 people have as much money as the world’s fifth-largest economy

While Hong Kong’s inbound tourism saw a big jump, with 5.28 million visitors entering the city – a 5.5 per cent year-on-year increase.

But despite the recent upbeat economic news, the PMI report concluded that business sentiment for the next 12 months “remained downbeat in November”.