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Monday, September 5, 2016, 15:03

HK edges closer to economic stability

By Lin Wenjie
HK edges closer to economic stability
The lifting of property-buying curbs on the mainland has benefited Hong Kong purchasers who wish to own a home in Shenzhen. (Brent Lewin / Bloomberg via

HONG KONG - Hong Kong’s private sector edged closer to stabilization in August, marking the slowest deterioration in operating conditions for over a year.

The Nikkei Hong Kong PMI rose to 49 in August from July’s 47.2, moving closer to the 50 threshold that separates expansion from contraction, but still staying in the contraction territory for the 18th straight month. Although this signaled a further worsening in the health of the sector, the rate of decline was only marginal.

Most sub-indexes picked up. Output and new orders both contracted at their weakest rates in 14 months, and new orders from the Chinese mainland declined only slightly. Purchasing activity also fell at a softer rate, while another modest reduction in staff numbers was signaled.

Inflationary pressures intensified in the latest survey period, with overall input costs rising at the quickest pace since January 2015, driven in part by the sharpest rise in purchasing prices for nearly five years, while output charges increased for the first time since July 2015.

"The encouraging sign was the weakest drop in sales to mainland China for 18 months, which is a key source of new business for Hong Kong companies,” commented Annabel Fiddes, economist at survey compilers IHS Markit.

"Overall, the data suggest that the worst may be over, but there still needs to be a meaningful upturn in client demand in order for a strong and sustained recovery to take place, which may be challenging given the relatively weak global economic environment,” Fiddes said.

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