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Hong Kong PMI February 2018

Hong Kong: PMI edges up on strong demand from mainland China in February

In February, the Nikkei Hong Kong Purchasing Managers’ Index (PMI), released by IHS Markit, edged up from 51.1 a month earlier to 51.7—a four-year high. Ticking higher, the PMI remained above the 50-point threshold that separates expansion from contraction in the private sector, where it has now been for half a year.

February’s figure was driven by stronger output and new orders, particularly from mainland China. Despite strengthening demand, firms were unwilling to increase hiring, and this contributed to rising backlogs. Purchasing activity was scaled up, which put further strain on supply chains as delivery times grew longer. Input costs, in turn, rose and pushed firms to increase prices at the fastest pace in a year and a half. Meanwhile, optimism surrounding production in the year ahead faded as higher costs and increased competition weighed on firms’ outlooks.

Commenting on February’s result, Bernard Aw, Principal Economist at IHS Markit, noted:

“The positive start to 2018 for Hong Kong’s private sector extended into February, setting the sector on course for its best quarterly performance in four years. However, business expectations for the year ahead turned negative as high competition and increased costs dented confidence. A side effect of higher costs was seen in the labor market. Hong Kong’s private sector reported a further decline in employment as firms revealed efforts to cut costs and layoffs as reasons. However, with operating capacity under strain, employment growth could be seen in months ahead.”

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