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Hong Kong PMI December 2018

Hong Kong: PMI edges up in December but closes the year on a weak note

The Nikkei Hong Kong Purchasing Managers’ Index (PMI), released by IHS Markit, rose from 47.1 in November to 48.0 in December. Nevertheless, the index remained below the 50-point threshold that separates expansion from contraction in the private sector, where it has been since April.

Weakness in demand continued to show in this month’s reading, fueled primarily by trade war concerns and a pessimistic business outlook. New orders and output fell for the ninth consecutive month in December due to lower mainland demand. Consequently, backlogs of work and employment levels continued to decline. In turn, purchasing activity softened in the month as manufacturers drew down existing inventories.

The main positive developments in December were on the supply-side, as suppliers’ delivery times finally stabilized after 20 consecutive months of lengthening, and manufacturers increased their selling prices for the first time in five months, in a bid to protect profit margins amid rising input costs. Indeed, input inflation accelerated to a five-month high in December, mostly on the back of higher raw materials prices.

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

“December saw a further deterioration in business conditions amid trade war concerns. The latest reading contributed to another weak quarterly average, which marks the lowest since mid-2016 [and is] indicative of annual GDP growth below 3% in the fourth quarter”.

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