PMI hits 48 in December as demand sinks

Vendor performance has deteriorated for 20 months.

Hong Kong’s private sector closed the volatile year on weak footing as the Purchasing Managers Index (PMI) hit 48.0 in December on the back of sustained weakness in Chinese orders, according to IHS Markit. 

The Nikkei Hong Kong PMI is a leading indicator of economic health to gauge business conditions in the private sector. PMI readings below 50 represent an economic contraction.

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As the protracted trade dispute weighed in on Chinese demand, firms had no choice but to cut back on output in December for the ninth straight month. “[F]irms were pessimistic about the business outlook, citing increasing uncertainty in the economic environment as well as greater competition. Negative sentiment saw them holding back on hiring and reducing purchasing activity,” Bernard Aw, Principal Economist at IHS Markit said.

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With employment levels moderating in December, Aw notes that job creation has not been recorded for the full-year period. Business confidence also remained downbeat with almost a fifth of panellists projecting lower output in the year ahead.

“The recent spate of downbeat PMI data supported recent downgrades to GDP projections. The PMI survey is indicative of annual GDP growth below 3% in the fourth quarter, while IHS Markit expects the Hong Kong economy to expand by an annual rate of 2.6% in 2019,” added Aw.