Hong Kong: PMI retreats to three-month low in October
November 3, 2016
The Nikkei Hong Kong Purchasing Managers’ Index (PMI) released by IHS Markit dipped to 48.2 in October after reaching an 18-month high of 49.3 in September. As a result, the index moved further away from the 50-threshold that separates contraction from expansion in business conditions, which it has been below since March 2015.
October’s more pronounced deterioration of business conditions signaled a further decline in Hong Kong’s private sector performance at the outset of the fourth quarter. Subdued client demand saw production and new orders weakening in October, while new business from mainland China dropped sharply. Against this backdrop, local firms remained prudent regarding employment, especially as they face an increase in employee costs. Despite declining staffing levels, a lack of substantial new projects allowed companies to reduce their amount of outstanding work. Purchases of raw materials also dipped in October after rising markedly in September, with firms withdrawing from existing inventories instead. Input prices rose for the fourth month in a row, albeit at a moderate pace.
Regarding future developments, Bernard Aw, Economist at IHS Markit, stated that, “unless we see evidence of stronger client demand in the coming months, the private sector is unlikely to lift itself out of the current downturn.”
Author: David Ampudia, Economist