Hong Kong: PMI dips in March on weaker demand from mainland China
In March, the Nikkei Hong Kong Purchasing Managers’ Index (PMI), released by IHS Markit, dipped from February’s four-year high 51.7 to 50.6. Despite ticking lower, the PMI remained above the 50-point threshold that separates expansion from contraction in the private sector, where it has now been for more than half a year. Moreover, a three-month average through March showed the strongest quarter for the index in four years.
March’s reading was driven by weaker gains in output and new orders, particularly from mainland China. Given softening demand in the month, including slower export sales to the mainland as the recent depreciation of the yuan weighed on trade, firms shed workers but were still able to work through backlogs. Despite slower purchasing activity, input demand continued squeezing supply chains as delivery times grew longer. Input costs continued rising, while firms slashed selling prices for the first time in nearly a year in order to boost sales. Meanwhile, strong competition—especially from e-commerce–and consumers’ tighter belts kept business expectations downbeat in the month.
Commenting on February’s result, Bernard Aw, Principal Economist at IHS Markit, noted:
“[S]ofter demand and negative business sentiment lead to questions over whether the current growth momentum can be sustained in coming months. Overall, the PMI-implied GDP model shows the economy growing by [4.0%] in the first quarter, but with the caveat of a loss of momentum moving into the second quarter.”