Hong Kong’s private-sector activity reported a renewed expansion on Wednesday after two consecutive months of contraction.

The S&P Global Hong Kong SAR Purchasing Managers’ Index (PMI) rose to 50.4 in May from 48.6 in April, indicating that business activity increased for the first time since March.

The growth is supported by a modest rise in new orders and a solid rebound in export demand, although purchasing activities expanded at a softer rate and cost pressures remained elevated. Business confidence stayed negative but improved to a three-month-high.

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Despite the city’s accelerating economic recovery, industry experts continue to urge local authorities to carefully calibrate macroeconomic policies to secure new growth drivers and address structural challenges.

“The pace of economic recovery remains uneven across sectors; externally oriented and financial sectors have expanded more rapidly than other service sectors,” ASEAN+3 Macroeconomic Research Office (AMRO) said.

The organization added that uncertainties in the global technology cycle in the near term remain a key risk, given Hong Kong’s high degree of global integration. Additionally, heightened volatility in global energy and financial markets could also weigh on growth.

Hong Kong’s economy in the first quarter of this year expanded 5.9 percent, the fastest pace in almost five years, supported by strong external demand and improved activity in tourism and financial services. Last year, the economy expanded 3.5 percent.

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“Over the medium- to long-term, population aging and intensifying geo-economic fragmentation will remain key structural challenges. Failure to diversify drivers could make the economy less resilient to fluctuations in global trade and financial services,” the AMRO said.

“We expect growth to moderate in the next few quarters due to prolonged uncertainties from (the Middle East) conflict, the resulting risks to the growth of key trade partners, and the tightening of financial conditions,” S&P Global Ratings said.

The United States-based credit agency added that although Hong Kong’s economy is likely to be relatively more sheltered from the supply impact of energy shocks, the city is less insulated from price spikes in the global energy markets.

Contact the writers at oswald@chinadailyhk.com