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Hong Kong PMI September 2018

Hong Kong: Business conditions deteriorate again in September due to falling mainland orders

The Nikkei Hong Kong Purchasing Managers’ Index (PMI), which is released by IHS Markit, fell from 48.5 in August to 47.9 in September. The index thus remained below the 50-point threshold that separates expansion from contraction in the private sector, where it has been for the past six months.

September’s reading again reflected weak demand conditions amid escalating US-China trade tensions. Both output and new orders fell at a sharper rate in the month, dragged down notably by markedly lower new business from mainland China. Output shrank at the fastest pace in just over two years, while the pace of decline in new orders was also among the sharpest registered in the last two years. Consequently, firms dampened their purchasing activity, allowing inventories to continue declining, while backlogs of work also fell. Despite the lack of supply-chain pressure, supplier delivery times increased in the month, which was partially due to the disruption caused by typhoon Mangkhut in mid-September. On the price front, input costs fell for the first time in over two years, which supported firms’ efforts to continue lowering their selling prices in order to boost sales.

Commenting on September’s reading, Bernard Aw, principal economist at IHS Markit, noted:

“The latest Nikkei PMI survey signaled another contraction in the private sector economy during the third quarter following a deterioration in the previous quarter. Growing uncertainty over future demand saw firms cutting back on input purchases and trimming inventories as part of efforts to conserve capital. […] The latest headline PMI is indicative of GDP growth running below a 2% annual rate in the third quarter.”

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