ECONOMY | Staff Reporter, Hong Kong

PMI plunges to 47.8 in May as orders dry up and costs mount

Companies turned to price discounts to offset sluggish sales.

Business conditions in Hong Kong’s private sector economy deteriorated even further from 49.1 in April to 47.8 in May as output contracted sharply and business pessimism remained muted, according to IHS Markit.

The Nikkei Hong Kong PMI is a leading indicator of economic health as it gauges business conditions in the private sector.

Also read: Hong Kong falls to second place as world's most competitive economy

Companies cut back on purchasing activity and hiring brought about by weaker demand and depleting input inventories. Lower intakes of new orders saw level of unfinished business plunge for the third consecutive month. However, cost pressures remained prompting companies to offer further reduction in selling prices amidst weak sales.

Also read: US-China trade war could hammer export-dependent Hong Kong hard

“May PMI data added further confirmation of the slowing of Hong Kong’s private sector economy as business conditions deteriorated further,” said Bernard Aw, principal economist at IHS Markit.

New work also dropped for the second consecutive month and at the steepest rate in almost two years. Export orders from the Mainland also crashed last month after a six-month period of growth.

“Business expectations for the year ahead also worsened, with the Future Output Index slipping to the lowest for over a year. Companies highlighted concerns associating pessimism with intense competition and weaker demand conditions,” he added.

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