S&P Global: Hong Kong's business environment deteriorates, August PMI falls to 49.5, plunging back into contraction.

S&P Global announced that in August, the Hong Kong Purchasing Managers' Index (PMI) adjusted for seasonal factors dropped from 51 in the previous month to 49.5, indicating a tightening business environment. Although the decline is not significant, it marks the first decrease since May of this year. Looking at the most recent survey month, private enterprises in the Hong Kong Special Administrative Region recorded their first cut in production since May, but the contraction was minimal. Survey data revealed a reduction in new orders, coupled with a slowdown in the local economy, which has hampered business growth. As for new export business, there was also a slight shrinkage, although the volume of orders received from mainland China showed a modest increase. Regarding prices, overall input costs rose in August, with the increase extending to a three-month high. Respondents indicated that due to surging raw material prices, procurement costs continued to skyrocket, contributing to the acceleration of cost increases. Additionally, expenditures on employee salaries also accelerated. To alleviate profit pressures, private enterprises in Hong Kong raised their selling prices, with the increase being the largest since May 2023. With the tightening of new orders, the backlog of work further decreased in August. Companies have been reducing headcount for five consecutive months, reflecting that idle capacity and cooling demand have significantly dampened their hiring intentions. Usamah Bhatti, an economist at S&P Global Market Intelligence, stated that the recent Purchasing Managers' Index indicates a regression in business sentiment. As sales in both international and local markets decline simultaneously, output and new orders have returned to contraction territory. Usamah Bhatti pointed out that the backlog index, which reflects capacity constraints, has now fallen for two consecutive months, and with employment further contracting, it indicates that leading indicators are similarly weak. Furthermore, businesses continue to express concerns about the outlook, particularly regarding the local economy, U.S. tariffs, and ongoing geopolitical risks.