Hong Kong: PMI retreats further into contractionary territory in February
March 3, 2017
The Nikkei Hong Kong Purchasing Managers’ Index (PMI) released by IHS Markit dipped to 49.6 in February from 49.9 in January, retreating more firmly into contractionary territory after briefly rising above the 50-point threshold that separates expansion from contraction in the business environment in December.
Demand for Hong Kong’s goods and services continued to decline, both in the domestic and external markets, contributing to the PMI’s fall. New orders and output declined in February, as a strong U.S. dollar—to which the Hong Kong dollar is pegged—continued to erode the competitiveness of Hong Kong’s products in overseas markets. Lower demand allowed firms to work through their backlogs of work as excess production capacity built up. Staff levels were cut in February as lower demand took its toll on the labor market. In what amounted to the silver lining of an otherwise dire report, lower inflationary pressures allowed firms to offer price discounts, a boon for businesses struggling to remain competitive overseas.
Author: Christopher Thomas, Economist