The headline HSBC Hong Kong PMI – a composite index designed to provide timely indications of changes in prevailing business conditions in the Hong Kong economy – posted 52.6 in June, down from the 53.2 reported in May. Nonetheless, the latest positive reading (above the 50.0 no-change mark) was the eleventh in successive months, and signalled a solid improvement in business conditions.
Incoming new business received by companies in Hong Kong increased for a twelfth consecutive month during June. Panellists attributed the latest rise in new work to the ongoing improvement in global economic conditions. However, growth of new business slowed during the month, with the latest increase the weakest since July 2009.
New business received from mainland China also grew at a slower pace during the month, although this remained sharp in the context of historical data.
The rise in overall new business supported a further increase in output in June. Moreover, the pace of expansion accelerated slightly since May. Despite this, backlogs of work at companies in Hong Kong continued to rise. Outstanding business has now increased continuously over the past year.
Reflective of sustained expansions in new orders and output, employment within the Hong Kong private sector rose during June. The latest increase was only marginally lower than the twenty-eight month high recorded in April.
Despite the further rise in output, purchasing activity was broadly unchanged during June. This ended a ten-month period of increased input buying. However, stocks of purchases rose again, albeit at a marginal pace, suggesting that the latest level of purchasing was largely sufficient to meet output requirements.
Overall input costs faced by companies in Hong Kong increased substantially during June, driven by higher purchase prices and staff costs. Purchase price inflation was broadly unchanged since May, although the rise in wages accelerated. Output prices rose for an eighth successive month during June, although the latest increase was the weakest in that period, with the rise in charges limited by competition for new business.
“Growth in new business inflows to Hong Kong eased from the previous month, resulting in a slowdown in the headline PMI for the second consecutive month. However, a continuously improving labour market should support solid expansion in Hong Kong’s domestic demand. Inflation is likely to rise in the coming months despite a slower rise in output prices,” says Mark McCombe, Chief Executive of HSBC, Hong Kong.
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