Pedestrians walk along a footbridge in Hong Kong’s Wanchai area on Jan 17, 2022. (BERTHA WANG / AFP)
Hong Kong’s private-sector activity shrank at the start of 2022, with the IHS Markit’s Hong Kong Purchasing Managers’ Index dropping to 48.9, its first negative reading in 11 months, amid the fifth wave of the COVID-19 pandemic.
The figure, down from 50.8 in December, is the lowest since March 2021, according to the London-based information provider. The result is the first contraction in the city’s private sector’s activity and the lowest business sentiment in a year, as uncertainties caused by the worsening of the pandemic weigh on the city’s firms.
The deterioration of COVID-19 conditions led to an immediate contraction of the Hong Kong SAR’s private sector. Demand and output conditions both declined to a state comparable to early 2021, when the region previously saw elevated COVID-19 cases.
Jingyi Pan, IHS Markit economics associate director
PMI readings above 50 represent expansion while those below that level signify contraction. PMI readings are sequential and represent month-to-month expansion or contraction.
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“The deterioration of COVID-19 conditions led to an immediate contraction of the Hong Kong SAR’s private sector,” said Jingyi Pan, IHS Markit economics associate director. “Demand and output conditions both declined to a state comparable to early 2021, when the region previously saw elevated COVID-19 cases.”
Dampened demand, including from the Chinese mainland, resulted in less purchasing activity in Hong Kong’s private sector with a reluctance to stockpile goods, which led to lower inventory levels in January.
Also among the top drags to the performance were the supply-chain disruptions induced by the pandemic, which leads to shipping delays with suppliers’ delivery times lengthening at a sharper rate in January, the report showed. The cancellation of orders also contributed to the decline.
Bucking the trends, employment levels increased marginally as local firms hired staff at the start of 2022 while both purchase prices and wage inflation eased.
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The worsening private-sector performance could see a turnaround after the current COVID-19 wave is brought under control, Pan said, forecasting the city’s GDP to expand by 3 percent in 2022.
