Hong Kong’s economy is on the brink of recession after private sector activity fell to the lowest level in a decade amid the financial hub’s worst political crisis in decades and escalating trade war rhetoric.
IHS Markit’s report on the territory’s purchasing managers’ index (PMI), released today, said that August saw “the steepest deterioration in the health of the private sector since February 2009”.
The cut-back in purchasing activity during the month slumped to the lowest level since the data was first compiled in 1998, the report said. It added: “Anecdotal evidence pointed to lower sales and a pessimistic business outlook as the primary factors behind the sharp fall in stocks,”
Hong Kong has been wracked by a wave of pro-democracy protests since June, when chief executive Carrie Lam proposed a controversial extradition bill that would have allowed citizens to be extradited to mainland China.
Protestors regard the proposed bill as an erosion of the freedoms afforded to the territory under the “one country, two systems” framework that is designed to afford it some independence from Beijing. It was reported today that Lam is on the brink of withdrawing the bill.
The financial hub’s PMI slumped to 40.8 in August from 43.8 the month before. Any number under 50 indicates a contraction; this is the 17th successive month Hong Kong has posted a figure below 50.
New orders fell at the steepest rate since 2009, with the figure “dragged down by a record decline in orders from mainland China.”
Almost half of respondents reported reduced Chinese demand, blaming the escalating trade war between the US and China, depreciation in the renminbi, and the ongoing protests in Hong Kong.
“The latest PMI data reveal a Hong Kong economy flirting with recession in the third quarter as business activity is increasingly aggravated by protest-related paralysis,” said IHS Markit’s Bernard Aw.
“The rates of decline in output, new orders and export sales accelerated sharply in August,” Aw continued, adding: “the only other time that the PMI survey has recorded a steeper downturn [was] during the SARS epidemic in 2003 and the global financial crisis in 2008-2009.”
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