PMI improves to 43.9 in May but business outlook remains bleak

Firms are still worried about the long-term effects of the pandemic.

Hong Kong’s seasonally-adjusted headline Purchasing Manager’s Index (PMI) rose to 43.9 in May from 36.9 in April, the highest in four months but also mirroring a drop in the health of the private sector, an IHS Market report revealed.

Whilst the pandemic continues to batter the sector, the gradual easing of social distancing measures anchored business activity at some companies. Output fell in May but the contraction was the softest since January. A similar trend was seen in sales where new business inflows weakened at the slowest pace for four months.

Firms were marginally less negative about the year-ahead outlook in May than in April, with confidence surging to a four-month high. That being said, overall outlook is still low with panellists focusing on the concerns over the lasting effect of the coronavirus on economic activity.

Battling muted sales and higher spare capacity, firms slashed purchasing activity, inventories, and workforce even more in May, with the rates of decline in all three areas the flattest since January, the report said. Supply chains are still being weighed down as delivery times prolonged for the fifth consecutive month.

On the price front, input costs were unchanged in May due to a rise in paid prices. Panellists generally commented on wage subsidies and the furloughing of workers for lower salary bills. Meanwhile, increased prices for freight services and input materials such as gold and electronic components contributed to higher purchase costs, the report concluded.

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