S&P Global has announced a further decline in the S&P Global Hong Kong SAR Purchasing Managers’ Index (PMI), which fell to 48.2 in June from 49.2 in May. This marks the second consecutive month of contraction and the lowest index value since September 2022.
The report highlights ongoing challenges in the private sector, with new business and overall activity continuing to decline. Market weakness and heightened competition have negatively impacted business sentiment, leading to another round of job cuts in June. Additionally, the growth in average input costs has accelerated, driven by a rebound in purchasing price inflation, resulting in higher fee inflation.
Private sector output experienced its second consecutive monthly decline, with the contraction rate reaching its highest level in over two years. This decline was primarily due to a further decrease in new business inflows, with both Mainland China and overseas markets showing similar rates of decline. Survey respondents indicated that the manufacturing sector was hit hardest, experiencing the largest drops in new orders and output due to weak local and external economies and increased competition.
The continuous decline in new orders has resulted in reduced backlogs of work for the ninth straight month. This situation has led to redundancies and a slight decrease in employment levels for the second month in a row. Hong Kong companies have expressed a generally pessimistic outlook for the year ahead, citing concerns over rising competition and a weakening economy. However, the level of pessimism has decreased to a seven-month low. Some firms have increased purchasing activity, anticipating future demand, which has led to a rise in inventory levels supported by improved delivery efficiency.
On the pricing front, average input costs for private sector firms in Hong Kong increased in June, influenced by higher purchasing prices and wages. The growth rate of average purchase prices accelerated to its highest since February, while wage inflation rose to a four-month high. Private sector firms raised selling prices again in June following a marginal decline in May. Output price inflation was modest but consistent with the long-term average trend.
Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, commented on the findings, stating that the sharper decline in private sector new orders and output in June reflects worsening business conditions. The struggling economy and intensifying regional competition continue to pose significant challenges for companies in Hong Kong.
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