A man, left, eats his dinner in an alleyway as another man, right, checks his phone in a residential doorway on a pavement in Hong Kong on Jan 4, 2021. (PHOTO / AFP)

Hong Kong’s business conditions in December saw the steepest downturn since April last year amid supply chain disruptions caused by fresh measures to combat a fourth wave of COVID-19 infections, according to a private sector survey.

The IHS Markit Hong Kong Purchasing Managers’ Index plunged to 43.5 in December from 50.1 in the previous month, signaling a further deterioration in business sentiment after a brief stabilization. The 50-mark gauge separates growth from contraction on a monthly basis.

The recent deterioration in the global pandemic situation has seriously disrupted supply chains, with output and new orders sinking to their lowest levels since April last year due to constrained output capacity and higher production costs that have hit companies’ international and domestic operations

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The recent deterioration in the global pandemic situation has seriously disrupted supply chains, with output and new orders sinking to their lowest levels since April last year due to constrained output capacity and higher production costs that have hit companies’ international and domestic operations.

Exports plummeted at a faster rate in December, blamed on slumping demand arising from lockdowns in key markets, as well as shipping delays.

Employment was hard hit, with job losses peaking since April and the sharpest plunge in headcounts since the 2008 global financial crisis.

The survey shows the number of pessimists continued to outnumber optimists, reflecting concerns over the pandemic and potential fresh infection waves in the coming year. However, buoyed by the rapid production and utilization of COVID-19 vaccines, the business climate has improved from its lowest since June 2019, underlining the hope of life returning to normalcy this year.

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 “While the December data have added to the economic gloom of 2020, companies were less downbeat about prospects for the year ahead, with hopes pinned on the encouraging vaccine developments. However, the severe downturn signaled by the latest PMI data underscores how the economic situation may yet deteriorate further amid the rising wave of infections before improvements are seen,” said Chris Williamson, chief economist at HIS Markit.

The IHS Markit Hong Kong SAR PMI is compiled by IHS Markit, based on responses to questionnaires sent to purchasing managers of about 400 companies in the manufacturing, construction, wholesale, retail and services sectors.