Business activity sinks to record-low as PMI drops to 39.3 in October

Demand from mainland China fell at the sharpest rate in 21 years.

Hong Kong’s private sector recorded the steepest decline in business activity since November 2008, as the purchasing managers’ index fell to 39.3 in October from 41.5 in September, according to IHS Markit.

Demand from mainland China declined at the sharpest pace in IHS Markit’s 21-year history. Business confidence was dragged even lower amidst the ongoing unrest and a worsening trade environment, with growing pessimism seen among firms, they noted.

“Hong Kong's private sector remained mired in one of its worst downturns over the past two decades during October, with the latest PMI survey signalling a deepening economic malaise,” said Bernard Aw, principal economist for IHS Markit.

New business inflows fell at the sharpest rate since January 2009, led by a record decline in new orders from mainland China. As a result, backlogs of work declined further and at a marked pace, the report noted.

Further, firms cut back further on their purchasing activity and input inventories in October, both reducing at a rate not seen since IHS Markit began their survey in July 1998. Although the fall of demand enabled vendors to marginally shorten their delivery times, there were also delays due protest-related roadblocks.

“As new orders continued to fall sharply, led by a record decline in demand from mainland China, firms were becoming increasingly pessimistic about the outlook. Business sentiment fell to a level not seen for over seven-and-a-half years as companies were concerned about the impact of protests and a deterioration in the global trade environment on economic activity,” noted Aw.

IHS Markit’s Future Output Index slumped to a new record low at almost -8 points, with a large proportion of survey respondents expecting lower business activity in one year's time.