In July, the Hong Kong Special Administrative Region (SAR) witnessed a slight improvement in its private-sector performance, according to a report released by S&P Global. The seasonally adjusted Hong Kong Purchasing Managers Index (PMI) increased to 49.5 in July, a modest rise from the 48.2 recorded in June.
However, it remains below the crucial 50-point threshold, which indicates a contraction in business activity rather than growth. S&P Global explained that while the rate of contraction in overall business activity in Hong Kong has lessened from June's figures, where the pace of decline was the steepest in over two years, the sector is still experiencing challenges.
Unlike many other countries, S&P Global does not differentiate between the manufacturing and service sectors in Hong Kong. Instead, it generates a unified PMI that encapsulates the entire economy of the SAR. Despite the uptick in the PMI, the data reveals that private-sector output has been on a declining trend for three consecutive months in July, primarily influenced by a downturn in the manufacturing sector.
Employment levels have also experienced a downward trajectory. Interestingly, counter to the overall trend, there was a noted increase in new business from Mainland China, marking the first rise in a year, as reported by S&P Global. This may signal a potential shift in demand dynamics that could benefit the Hong Kong economy. Business operators in Hong Kong observed a decline in input costs, although wage levels continued to experience modest growth throughout July.
Notably, purchase costs decreased for the third month in the last four, attributed to reduced pressure on supply for raw materials. However, staff costs showed an increase that was modest, manifesting the slowest growth rate in six months, according to the report. Sentiment among Hong Kong business managers remained downbeat as they looked to the next 12 months.
The private sector's overall sentiment was characterized as pessimistic, extending a trend of negative assessments that has persisted for a year. Business leaders cited rising competition and uncertainty in the economic outlook as significant factors contributing to their forecasts of lower output for the protracted future. Analysts stress the importance of a resurgence in demand conditions to stimulate growth across various measures of economic activity and employment in Hong Kong.
The PMI for the Hong Kong SAR was compiled based on survey responses from 400 private-sector companies gathered between July 11 and July 26, highlighting a snapshot of business sentiment during that critical period..