Hong Kong business activity falls to decade low as protests intensify
Private sector business activity in Hong Kong plunged to its lowest level since the financial crisis, a private survey showed on Monday, as the city’s economy grapples with weeks of political unrest and the US-China trade war.
The latest IHS Markit Hong Kong purchasing managers’ index survey, which measures private sector activity in the territory, sank further to 43.8 in July from 47.9 in June, marking the steepest fall in the gauge since March 2009. A reading below 50 represents a contraction, with the index having now been below this mark for 16 months in row.
Meanwhile, business confidence in the city during the month fell to its lowest ebb since January 2016, when fears were mounting over a destabilising slowdown in the Chinese economy.
The survey cited the impact of two months of political turbulence in Hong Kong, which has seen millions of demonstrators drawn out onto the streets to protest against a now suspended bill that proposed sending criminal suspects extradited to mainland China. The protests have continued, leading to increasingly frequent clashes with police.
On Monday morning Hong Kong was preparing for its first general strike in 50 years.
The city has also been caught in the crossfire of the trade war between the US and China, which has seen the world’s top two economies slap tariffs on billions of dollars of each other’s exports.
Those conditions have led to lower demand for goods and services from Hong Kong businesses, with new orders from mainland Chinese falling by their steepest rate in almost four years. That has prompted some companies to lower prices, leading to signs of deflation, the survey found.
“The rate of decline in both new orders and business activity was the steepest for over a decade, reflecting worsening demand conditions brought on by an ongoing US-China trade war and an escalation in large scale political protests in Hong Kong,” said Bernard Aw, principal economist at IHS Markit.
He added that businesses had become “increasingly pessimistic” amid rising uncertainty.