The latest reading represents the weakest showing in nine months.

Business conditions in Hong Kong’s private sector economy dropped even further from 50.6 in March to 49.1 in April representing the first deterioration in the sector’s health since August last year, 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.

Companies cut back on production and purchasing activity amidst lower orders and declining employment levels. Despite rising costs, companies also reduced selling prices to boost sales even so, overseas sales especially to the China market hit its lowest point in six months.

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Supply shortages in raw materials like paper and electronic components and late shipments also led to delivery delays.

“The decline in the PMI is perhaps not surprising, not least because of overstretched supply chains and a very tight labour market. With persistent delivery delays and growing skill shortages, output is clearly being restricted,” said IHS Markit principal economist Bernard Aw.

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Hong Kong’s private sector also registered its fourth consecutive month of reduced staff numbers giving rise unsurprisingly to negative business expectations for the near term. 

“With a fall in new orders and business sentiment remaining negative, the economy seems set to slow further in the coming months. Indeed, after a positive start to the year, the second quarter could prove challenging,” Aw added.