SMEs grow more guarded as July business receipts weaken

The business receipts index fell to 43.8.

Small and medium-sized enterprises (SMEs) became more cautious in July, with business receipts and employment indicators weakening slightly as uncertainty over developments in the Middle East clouded the near-term outlook, according to the Census and Statistics Department.

The current diffusion index (DI) for business receipts amongst SMEs fell to 43.8 in July from 44.0 in June, remaining in contractionary territory.

The one-month-ahead outlook DI for August stood at 46.8.

The survey measures sentiment amongst companies with fewer than 50 people engaged.

A reading below 50 indicates contraction, whilst a reading above 50 signals expansion.

The decline was particularly evident in the import and export trades and retail sector.

The current DI for business receipts in the import and export trades fell to 44.5 in July from 45.4 a month earlier, whilst the retail trade index also declined from 41.7 to 40.8.

Amongst import and export businesses, the current DI for new orders fell from 46.4 in June to 45.0 in July.

The outlook DI for new orders in August was 47.1, remaining below the 50-point threshold.

A government spokesperson attributed the more guarded assessment of the near-term business environment to persistent uncertainty surrounding developments in the Middle East.

The government said continued growth in the Hong Kong economy could provide some support for business confidence and activity.

But it identified the evolving Middle East situation as a key downside risk, warning that further escalation could affect external demand, market confidence, operating costs, and investment decisions.

The government said it would continue to monitor the external environment.

The SME survey draws responses from a panel of about 600 companies each month.

The government cautioned that the findings are subject to sample-size constraints and reflect the views of respondents regarding their own businesses.