Hong Kong: PMI sinks further into contractionary territory in May as global expansion loses steam
June 5, 2018
The Nikkei Hong Kong Purchasing Managers’ Index (PMI), which is released by IHS Markit, fell from 49.1 in April to 47.8 in May, the third consecutive decrease in the index and a further indication that the economy has lost traction in the second quarter. The index now lies further below the 50-point threshold that separates expansion from contraction in the private sector.
May’s print came on the back of steep declines in output and new work orders, which both fell at the fastest pace in nearly two years. Firms reported that weak demand and strong competition weighed on sales. Meanwhile, export orders to mainland China decreased for the first time in six months in May, likely affected by the uncertainty surrounding the trade dispute between China and the United States. In addition, subdued demand led to a continued decline in outstanding business. Moreover, employment fell again in May for the fifth month running, albeit at a softer rate. Firms also scaled back purchasing activity, which fell at a faster pace in May. Supply chain pressures persisted, however, amid shortages and longer lead times. On the price front, input price inflation eased in May, whereas firms’ discounting tactics, used in hopes of boosting sales, caused selling prices to fall at the fastest rate in over a year.
In response to May’s performance, Bernard Aw, Principal Economist at IHS Markit, commented:
“The average PMI reading for the first two months of the quarter generally provides a reliable guide to the full quarter’s GDP. Compared to historical data, the average PMI so far in the second quarter is running at a level broadly consistent with GDP annual growth rate at around 3.6%, suggesting that the strong 4.7% growth in the opening quarter of 2018 is not sustainable.”
Author: Lindsey Ice, Economist