Hong Kong PMI Signals Further Modest Improvement in Business Conditions

December data showed a further improvement in business conditions in Hong Kong’s private sector, although the rate of growth eased from November’s ten-month peak. Output and new orders both increased at weaker rates, but were still showing better trends than that recorded earlier in the year. Meanwhile, employment fell for the tenth consecutive month, with the rate of contraction the fastest since July.


The HSBC Hong Kong Purchasing Managers’ Index (PMI) posted 51.2 in December, signalling a modest improvement in business conditions in Hong Kong’s private sector. Although down from November’s 52.1, the PMI was nonetheless the second-highest for ten months.


The PMI is a composite index designed to provide timely indications of changes in prevailing business conditions in Hong Kong’s private sector economy.


“The pace of growth in the Hong Kong economy may have slowed marginally in December, but output and new orders are still rising faster than their historical average rates," says Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC. "There was an overall contraction in employment, but the acceleration in new orders from China is encouraging, and should limit any downside to overall output.”


Incoming new business at private sector firms increased for the second month running during December. Although having eased from November, the rate of growth remained solid. Notably, new orders from Mainland China also rose over the month, with the latest increase the fastest since August 2011.


Reflective of larger new order volumes, output continued to rise in December. Business activity has risen for four consecutive months, with the rate of growth modest and the second-fastest since January.


Concurrently, backlogs of work at monitored companies were broadly unchanged from one month previously.The quantity of goods and services bought by private sector firms increased in December, with panellists often linking this to increased new business. Some of the increase in purchases was held back as stock, with input inventories rising for the first time since September.


Meanwhile, suppliers’ delivery times lengthened further in the latest survey period. The increase in lead times for inputs was modest and the weakest in three months.


Private sector employment in Hong Kong fell for the tenth consecutive month in December. Almost 5% of surveyed firms reduced their headcount since November, with the overall rate of contraction the fastest in five months.


Total input costs faced by private sector companies in Hong Kong continued to rise in December. The rate of inflation picked up slightly, but remained weaker than the long-run series average.


Similarly, average selling prices also increased in the latest survey period. Panellists generally commented that larger costs were passed on to clients, although other respondents also mentioned unfavourable exchange rates. Nevertheless, output charges rose only marginally and at the weakest pace for seven months.



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