HK private economy remains mired in gloom due to virus

Business | 3 Jun 2020 12:53 pm

While worsening conditions eased in Hong Kong's private sector, business sentiment remained severely negative as a result of the uncertainty over the longer-term impact of the coronavirus pandemic, a private survey says.

The seasonally-adjusted headline IHS Markit Hong Kong Purchasing Manager’s Index by IHS Markit climbed from 36.9 in April to 43.9 in May, its highest in four months.

But it remains below the no-change 50.0 level.

Bernard Aw, principal economist at IHS Markit, said, the private economy remained mired in a downturn during May, though the PMI survey showed signs that the economic decline is bottoming out as parts of the economy reopened.

"While job losses persisted in May amid reports of further layoffs, the rate of job shedding weakened. There was evidence that government wage subsidies reduced employment costs and had helped with staff retention,'' he said. "But, business sentiment remained weak as firms continued to worry about the longer-term impact of the coronavirus pandemic on economic activity.''

The latest reading shows a decline in the health of the private sector, IHS markit says.

The virus pandemic continued to weigh on the private sector economy, but the easing of some social distancing measures helped to support business activity at some firms, IHS Markit says.

Output fell further in May, but the rate of contraction was the softest since January. This was accompanied by a similar trend seen in sales, where new business inflows fell at the weakest pace for four months.

Notably, the degree to which orders from mainland China fell was the smallest for a year, and considerably slower than seen in recent months.

Companies were slightly less pessimistic about the year-ahead outlook during May than in April, with confidence rising to a four-month high. That said, overall sentiment remained weak, with panellists highlighting concerns over the longer-term impact of the virus on economic activity, IHS Markit says.

Facing lower sales and increased spare capacity, companies reduced their purchasing activity, inventories and staff numbers further in May. However, the rates of decline in all three cases were the slowest since January.

 

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