Hong Kong: PMI retreats into contractionary territory in August
September 5, 2017
The Nikkei Hong Kong Purchasing Managers’ Index (PMI) released by IHS Markit fell back into contractionary territory in August following four months of expansion. The index landed just below the 50-point threshold that separates expansion from contraction, coming in at 49.7 in August from 51.3 a month earlier and reflecting a slowdown in both domestic demand and demand from mainland China.
The deterioration was driven by declines in output, new orders and employment. New business growth reported a decline for the first time since May after growing at the fastest rate in nearly two and a half years in July. Furthermore, business activity slowed in August, causing firms to hire fewer new employees. Backlogs subsequently grew in August, although this was likely also due to compliance with restrictive Chinese environmental laws. Meanwhile, price inflation rose because of higher wages and input costs, which firms translated into modestly higher selling prices. Business confidence remained largely downbeat with the exception of the outlook on future output, which recorded the brightest print in two and a half years.
In response to August’s deterioration, Bernard Aw, Principal Economist at IHS Markit, commented that, “A deterioration in business conditions […] raises concerns regarding economic growth over the next few months, with forward-looking indices providing a negative prognosis.”
Author: Lindsey Ice, Economist