Illuminated buildings are seen from Victoria Peak at night in Hong Kong on Aug 28, 2019. (PAUL YEUNG / BLOOMBERG)
Hong Kong’s business sentiment rebounded significantly in October, as the city’s Purchasing Managers’ Index surged to 49.8, the highest since March 2018, with sentiment the least negative since June 2019.
With business activity and new sales falling at much slower rates than in recent months, the latest seasonally adjusted IHS Markit PMI saw Hong Kong’s private sector stabilize further during October amid an easing of the COVID-19 pandemic.
With business activity and new sales falling at much slower rates than in recent months, the latest seasonally adjusted IHS Markit PMI saw Hong Kong’s private sector stabilize further during October amid an easing of the COVID-19 pandemic
Though 2.1 points higher than the September index, the latest reading was fractionally below the 50.0 level, indicating broadly unchanged business conditions in the private sector.
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Social distancing measures continued to weigh on business operation and consumer behavior in October. But the rate of contractions for business output was the lowest in over two-and-a-half years.
Similarly, inflows of new business dropped at the slowest pace in four months, linked to rising demand from the Chinese mainland, which shrank at the weakest rate in the current 30-month sequence of decline.
Business sentiment remained negative amid social distancing measures and concerns over the global economy. However, the degree of pessimism was the weakest since June 2019 as a greater proportion of firms expect activity to rise over the coming 12 months, noted Bernard Aw, principal economist at IHS Markit.
Hong Kong’s private sector steadied at the start of the fourth quarter. Activity and sales fell at noticeably softer rates while sentiment toward the coming year was the least negative for over a year, reflecting an increasing number of firms that anticipate a rise in future output, he said.
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A further relaxation in virus containment measures, starting from Oct 30, will provide more economic relief, putting the economy in a better position to return to growth territory as the end of the year approaches, Aw said.
But employment fell back into decline, with anecdotal evidence pointing to forced redundancies, he noted.
DBS Hong Kong economist Samuel Tse said it will be difficult for the PMI to go above 50 again. Though the economy continued to rebound, it will take time to recover to pre-pandemic levels, as the border is yet to open, and the pandemic in Europe and the US remains severe, he said. The future unemployment rate remains worrying amid a gloomy labor market, he added.
READ MORE: HK's private sector contraction slows in September
With government financial deficit surpassing HK$300 billion ($38.7 billion), Tse said it is unclear whether the remaining HK$800 billion fiscal reserve will be sufficient to launch more market stimulus measures.
