In December 2024, the business conditions within Hong Kong's private sector showed signs of improvement, although at a more subdued pace compared to previous months. A recent report from S&P Global revealed that demand experienced a decline both within Mainland China and in international markets, which greatly influenced the overall business sentiment. The seasonally adjusted S&P Global Hong Kong SAR Purchasing Manager's Index (PMI) dipped slightly to 51.1 in December, down from 51.2 in November 2024.
This adjustment marks the softest increase observed over the last three months, indicating a cautious outlook among businesses in the region. S&P Global pointed out that the reduction in the PMI can be traced to declining figures in key areas such as output, new orders, employment, and stock levels.
This trend highlights a growing concern among firms regarding external factors impacting their operational dynamics. The diminished number of new orders, coupled with reduced output, is attributed to a modest decrease in demand from both the mainland markets and other international sectors. This has created a ripple effect, leading to hesitance in hiring, as employers express a growing pessimism regarding the sustainability of their external demand. Jingyi Pan, the economics associate director at S&P Global Market Intelligence, emphasized the role of external demand as a significant barrier to growth during this closing month of 2024.
Businesses have voiced concerns about potential trade disruptions, notably due to the impending threat posed by US tariffs. Moreover, average input prices saw an increase in December 2024, registering the mildest rise in four years. This upturn was primarily driven by inflation in purchase prices, which were further exacerbated by climbing costs of raw materials.
As margin pressures mounted, many firms faced the dilemma of absorbing these cost increases or reducing their selling prices to stimulate sales. This issue was particularly prominent within the wholesale and retail sectors during December, where companies had to navigate these challenging economic waters while striving to maintain profitability amidst a turbulent market environment..