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Hong Kong business activity slumps further in March as virus pummels economy


HONG KONG (Reuters) - Business activity in Hong Kong deteriorated further in March, a private survey showed on Friday, as demand, output and confidence plunged amid the deepening coronavirus pandemic.

While the adjusted IHS Markit headline Hong Kong Purchasing Manager's Index (PMI) edged up to 34.9 in March, from 33.1 in February, it still signaled the second-sharpest deterioration of private sector conditions in the city since July 1998, when the survey began.

The 50-mark separates growth from contraction on a monthly basis.

"Key sectors of the economy such as retail, travel and tourism were decimated by the global coronavirus outbreak. Business activity across Hong Kong continued to contract at a severe pace in March, as new sales plummeted further," said Bernard Aw, principal economist at IHS Markit.

Hong Kong's small, open economy, which was already in recession, has been hit from all sides by the health crisis, particularly in the retail and tourism sectors. Retail sales fell by a record 44% in February from a year earlier. [nL4N2BM07S]

The trade outlook is also grim for the bustling port as increasing health lockdowns in many parts of the world crush global demand. While China's factories are gradually returning to work, growth is still well below usual levels and new orders from the mainland remain close to the record low seen in February.

With orders drying up, companies continued to cut back production, though the survey's output gauge ticked up to 26.0 after plummeting to 22.5 in February. New orders also showed another severe contraction.

"The average PMI for the first quarter suggests that the Hong Kong SAR economy had fallen deeper into recession. There are also concerns that the downturn will worsen in the second quarter as more drastic anti-virus measures may be taken worldwide," said Aw.

Business confidence, a forward-looking subcomponent in the survey, fell to its second-lowest since the data were first available in April 2012, with 59 percent of the survey respondents predicting lower output over the next 12 months due to uncertainties over the economic impact of the virus.

(Reporting by Meg Shen; Editing by Kim Coghill)

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