In September, Hong Kong's private sector business conditions exhibited signs of stabilization, as reflected in the recent data from the S&P Global Hong Kong SAR Purchasing Managers' Index (PMI). The index reported a neutral reading of 50, a notable increase from 49.4 recorded in August. A PMI reading of 50 signifies a delicate balance between expansion and contraction in business activity, indicating the conclusion of a worrying streak of four consecutive months of decline. Despite this positive shift, the landscape remains challenging as new orders continued to contract for the sixth consecutive month.
However, the rate of decline has shown signs of softening, hinting at a gradual easing in market conditions and the influence of tighter client budgets, particularly within the manufacturing sector. A significant development to note is the decline of incoming new orders from both Mainland China and international markets, which has marked a reversal from a brief surge seen in August.
Companies reported a mild reduction in overall business activity and hiring levels, while inventory levels saw an unexpected uptick. Although the inflation of input costs has moderated, the surge in purchase cost inflation has reached a one-year peak, compelling businesses to adjust their selling prices accordingly. Jingyi Pan, the Economics Associate Director at S&P Global Market Intelligence, emphasized that while signs of stabilization and enhanced margins are becoming evident, sentiments within the business community remain cautious due to ongoing economic uncertainties and increased competitive pressures.
This situation has prompted firms to anticipate a boost in purchasing activities as a proactive measure against potential shortages, particularly as supply delays are causing a lengthening of lead times, as indicated in the S&P Global report..