Standard & Poor's Global Hong Kong June PMI Fell to 47.8, the Weakest Business Confidence in Nearly Five Years.

Hong Kong's private economy continues to shrink. After seasonal adjustments, the S&P Global Hong Kong Purchasing Managers' Index (PMI) fell from 49 in May to 47.8 in June, indicating a deterioration in the business environment for the fifth consecutive month, with the largest decline since April 2022. Looking at the overall private economy, new orders received by businesses in June have decreased for the fifth consecutive month. Respondents revealed that their clients' financial budgets are tight, coupled with uncertainties in US trade policies, which have dampened customer demand. Furthermore, business volumes from both the mainland and overseas markets have significantly decreased compared to May, leading to businesses expanding their production cuts, with the decline in output being the most pronounced in a year. Due to the decrease in new orders, production capacity has been released, giving businesses more ability to handle outstanding orders. Despite maintaining the same number of employees as in May, the backlog of work has continued to decline for six consecutive months. Businesses are cautiously deploying staff recruitment, partly due to concerns about business prospects. Business sentiment is at its most negative since September 2020, with worries about soft local demand, exacerbated global economic weakness, and uncertainties in US trade policies. Overall input costs have increased, with the smallest increase since February 2021. Respondents generally believe that the slowdown in wage inflation is helping to suppress the rise in costs. Meanwhile, raw material prices have risen, significantly pushing up purchase prices, although the increase has eased compared to May. Industry data shows that input costs have increased in manufacturing, wholesale and retail, and services sectors, but have decreased in the construction sector. As inflationary pressures ease, Hong Kong's private enterprises have lowered selling prices for the third time in the past four months, albeit by a small amount. Some interviewed companies are offering discounts to stimulate sales. Usamah Bhatti, an economist at S&P Global Market Intelligence, stated that with weakening demand in both local and overseas markets, business operations have significantly reduced. Forward-looking indicators such as the new order index and business expectations index suggest that the situation in the second half of this year may become more severe. Overall business confidence has plummeted to its lowest level in nearly five years, causing concern. The weak global economic and trade environment, along with uncertainties in US trade policies, could potentially impact recent business performance. A recovery can be expected once there is a clear improvement in confidence and demand.