Hong Kong: PMI reaches 18-month high in September
October 5, 2016
The Nikkei Hong Kong Purchasing Managers’ Index (PMI) released by IHS Markit rose from August’s 49.0 to 49.3 in September. This was the highest reading in a year and a half, though it remains below the 50-threshold that separates contraction from expansion in business conditions, where it has been since March 2015.
September saw more modest declines in output, new orders and employment than in the previous month. The index improved on the back of a rise in purchasing activity after 26 months of uninterrupted declines, which also supported a pick-up in inputs inventories. Nonetheless, volumes of new work continued to decline as weak economic dynamics and scarce willingness to consume drove down demand from both domestic and clients in mainland China. Subdued demand prompted firms to reduce output for the eighteenth month in a row. Diminished production requirements forced companies to reduce their staffing levels, albeit at the lowest rate since June. Outstanding business and backlogs of work also fell. Regarding prices, input costs expanded robustly in September, the result of purchasing costs increasing at a five-year high rateand rising staff costs. On the other hand, output prices decreased, albeit only slightly.
Regarding future developments, Annabel Fiddes, Economist at IHS Markit, stated that, “we are yet to see evidence of stronger client demand, which the sector requires to lift itself out of the current downturn and to make a sustained recovery.”
Author: David Ampudia, Economist