Private sector growth in Hong Kong falters at start of Q2
Staff Writer |
Business conditions in Hong Kong’s private sector deteriorated at the start of the second quarter.
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Output, new orders and employment all fell in April.
Soft client demand prompted firms to cut back on purchasing activity which, in turn, weighed on inventories.
Companies also reduced selling prices to boost sales, despite rising costs.
Business expectations remained pessimistic.
Meanwhile, supply chains continued to be stretched.
The seasonally adjusted headline Nikkei Hong Kong Purchasing Manager’s Index (PMI) fell from 50.6 in March to 49.1 in April.
The latest reading indicated the first deterioration in the health of the sector since August 2017.
Following a softer end to the first quarter, April data indicated a further weakening in underlying demand.
Inflows of new business declined after four months of growth.
Overseas sales to China rose at the weakest rate in six months.
Lower sales were matched by a noticeable drop in output volumes, the first time in eight months that a fall has been recorded.
The pace of decline was also the steepest for nearly one-and-a-half years.
Meanwhile, backlogs of work showed the largest fall for over a year, even as lower employment continued to be reported.
Hong Kong’s private sector registered a fourth consecutive month of reduced staff numbers in April, with the degree of decrease the most marked since February last year.
However, anecdotal evidence suggested that shrinking workforce numbers were linked to voluntary leavers.
In line with reduced demand, firms scaled back on purchasing activity for the first time in almost oneand-a-half years, indicating a preference to tap on current inventories to meet demand.
Lower quantities of input acquisitions were reported in April, which, in turn, weighed on inventory levels.
Stocks of purchases fell further, with the rate of depletion the fastest for just over two years.
Despite lower input demand, supply chains remained overstretched.
There was evidence that supply shortages in raw materials, such as paper and electronic components, as well as late shipments led to delivery delays.
Global commodity shortages lifted input prices for raw materials, with April data showing another strong rise in paid prices for purchases, adding to overall cost burdens for Hong Kong’s private sector.
Overall input prices rose again in April, but at the weakest rate since July 2017.
Facing high competition, firms reduced selling prices for a second month in a row to boost revenue.
Expectations about growth remained negative at the start of the second quarter, with pessimism connected to increased competition, US-China trade tensions, a weaker exchange rate and higher business costs. ■