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HK PMI continues downward trend
2016/07/11

By Lin Wenjie (China Daily)

HONG KONG - The Nikkei Hong Kong Purchasing Managers' Index (PMI) in June recorded its second-strongest decline since August 2015, showing that operating conditions continued to worsen across the city's private sector.

The Nikkei Hong Kong PMI fell to 45.4 in June from 47.2 in May, still below the expansion cutoff of 50, signaling a solid deterioration of Hong Kong's private sector for the sixteenth successive month. The PMI is derived from indexes that measure changes in output, new orders, employment, suppliers' delivery times and stocks of goods purchased.

The June PMI was mainly dragged down by sharp declines in output and total new orders, both of which recorded the fastest decline since August 2015. As a result, firms reduced their purchasing activity sharply, which in turn contributed to a marked fall in stocks of inputs. A further drop in new work also led to a solid reduction in the level of backlogs.

Despite sharper declines in both output and new orders, employment fell at the slowest rate in 2016 to date, the PMI report said, with firms reducing their workforce numbers only slightly in June.

Overall, key variables such as output, new orders and purchasing activity all contracted at sharper rates amid weak global economic conditions and muted spending among local businesses.

"After it looked like Hong Kong's private sector was slowly moving closer to stabilization in May, June's data signaled that the current downturn intensified at the end of the second quarter," commented Annabel Fiddes, economist at survey compilers Markit.

"Unless there is a marked improvement in customer demand, it seems unlikely that Hong Kong's private sector will be able to lift itself out of the current downturn. However, given that global economic conditions continued to be dogged by uncertainty, including the recent announcement of Brexit, it's likely that confidence and activity will fall further in the second half of 2016," Fiddes said.

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