PMI survey shows Hong Kong economy contracted over fresh virus wave

A measure of economic activity in Hong Kong contracted in January for the first time in 11 months as the government imposed new restrictions amid a new wave of Covid-19 infections. 

The decline underscores the challenges facing the Asia finance hub as the spreading virus piles pressure on the government’s Covid-zero strategy. While that approach has kept overall infections low, it has isolated the city from much of the world through strict border controls and aggressive local measures. 

The city reported a record number of coronavirus infections Monday, with cases doubling every three days. New cases started to spike in the latter part of January and the government responded by ramping up restrictions, overlapping with the PMI survey period of Jan. 12-26. 

That outbreak is now hurting corporate confidence, with Hong Kong’s IHS Markit PMI falling to 48.9 in the month, down from 50.8 in December and below the 50 threshold that separates expansion from contraction. Both new orders and output fell for the first time since March while overall sentiment also turned negative -- business confidence fell to a one year low. 

On the upside, employment increased, and price pressures eased. 

“The deterioration of Covid-19 conditions led to an immediate contraction of Hong Kong SAR’s private sector,” Jingyi Pan, Economics Associate Director at IHS Markit, said in a release. “Demand and output conditions both declined to a state comparable to early 2021 when the region previously saw elevated Covid-19 cases.” 

(Bloomberg)