Hong Kong: PMI signals softest contraction in private sector activity since March 2018 in October
November 4, 2020
The IHS Markit Hong Kong SAR Purchasing Managers’ Index (PMI) rose to 49.8 in October, from 47.7 in September, marking the best result since March 2018. As a result, the PMI landed just below the critical 50-threhold, suggesting that operating conditions in the Hong Kongese private sector contracted only marginally at the outset of Q4.
Octobers’ improvement came largely on the back of softer contractions in output and new orders. Output dropped at the softest pace in over two-and-a-half years in October, amid easing Coivid-19 related restrictions, while the pace of decline in new businesses eased to a four-month low thanks to a slower fall in orders from mainland China. In turn, backlogs of work declined at a more modest pace. That said, employment levels dipped in October, contrasting September’s mild increase, with firms mentioning involuntary layoffs due to weak demand.
With regards to prices, although input costs rose for the first time since June, output charges continued to decrease on efforts to stimulate sales. Lastly, despite rising somewhat, businesses sentiment remained negative amid lingering uncertainty.
Commenting on the result, Bernard Aw, principal economist at IHS Markit, said:
"Hong Kong's private sector steadied at the start of the fourth quarter […]. Activity and sales both fell at noticeably softer rates while sentiment towards the year-ahead outlook was the least negative for over a year, reflecting an increasing number of firms that anticipate a rise in future output. […] a further relaxation of containment measures on 30 October will provide a further economic relief, putting the economy in a better position to return to growth territory as the end of the year approaches."
Author: Almanas Stanapedis, Economist