Brace yourselves for a recession in 2012

Blame it on Hong Kong’s business activity that remained persistently weak from August to December 2011.

The reason: Hong Kong’s business activity It fell for the fifth straight month in December due to the global economic slowdown, according to HSBC Holdings plc.

The HSBC Hong Kong Purchasing Managers' Index, a gauge of private business activity, has been below 50 since August. It stayed that way in December.

The index, however, rose slightly to 49.7 in December from 48.7 in November. A reading above 50 indicates an expansion, while a reading below that level indicates a contraction.

"Hong Kong escaped recession in 2011, but another dip into recession remains possible for 2012," HSBC said.

Chief Executive Donald Tsang said economic growth could fall to as low as 2% in 2012 from the 5% forecast for 2011.

The bright spot in December came from new orders, the index for which rose above the 50 mark for the first time in five months to 50.4 from 49.0 November. The rise in new orders was due to aggressive sales promotions and new product launches, HSBC said.

With manufacturing activity in China still shrinking—albeit at a slower pace than before—and the external economic outlook continuing to worsen, Hong Kong businesses ran down their back logs of work in December to minimize the impact of slower growth in new orders, the bank said.

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