Hong Kong: PMI remains feeble at the start of the year
The Nikkei Hong Kong Purchasing Managers’ Index (PMI), released by IHS Markit, rose from 48.0 in December to 48.2 in January. Nevertheless, the index remained below the 50-point threshold that separates expansion from contraction in the private sector, where it has been since April.
A slowdown in mainland China and concerns regarding its trade war with the United States continued to be the main drag on the private sector in January. New orders and output fell for the tenth consecutive month on lower mainland demand, while backlogs of work and employment levels continued to decline. In turn, purchasing activity also declined, but pre-production inventories rose for the first time in over a year, indicating that weak client demand was starting to lead to stock buildups.
Finally, regarding price developments, input cost inflation accelerated to a seven-month high despite remaining modest, prompting firms to raise their selling prices—albeit marginally—for the second month in a row.
Commenting on this month’s reading, Bernard Aw, principal economist at IHS Markit, noted:
“The latest reading is consistent with an annual GDP growth rate of 1.5%, providing further evidence of slowing momentum. Given flagging Chinese demand, the outlook for Hong Kong’s private sector continues to darken. […] With recent PMI surveys painting an increasingly challenging economic environment for Hong Kong, growth is expected to slow in 2019.”