Hong Kong: Business conditions in the private sector deteriorate further in July
August 3, 2018
The Nikkei Hong Kong Purchasing Managers’ Index (PMI), which is released by IHS Markit, inched up to 48.2 in July from 47.7 in June, remaining below the 50-point threshold that separates expansion from contraction in the private sector. July’s print represents the fourth consecutive month of deteriorating business conditions.
The weak print in July came on the back of further declines in both new work orders and output as demand from mainland China continued to ease, with new work orders growth falling to a two-year low in July. Moreover, slower business led firms to scale back purchasing activity, and backlogs of work continued to decline. Subsequently, employment fell again for the seventh month running. Meanwhile, cost inflation remained elevated in July, albeit easing from June’s markedly high level. In response, firms marginally raised output prices. Business sentiment fell to an over one-and-a-half-year low in July on concerns over escalating trade tensions between the U.S. and China.
Regarding July’s PMI reading, Bernard Aw, principal economist at IHS Markit, commented:
“Hong Kong’s private sector got off to a poor start at the beginning of the third quarter, with business conditions deteriorating further in July, according to latest Nikkei PMI data. Of particular concern is the adverse impact of the US-China trade dispute on Hong Kong’s economy. The latest headline PMI is consistent with GDP growth running below an annual rate of 2% at the start of the second half of 2018.”
Author: Lindsey Ice, Economist