In this Sept 7, 2023, photo, a traditional junk Dukling plies Hong Kong's Victoria Harbour. (SHAMIM ASHRAF / CHINA DAILY)

Business conditions in Hong Kong’s private sector showed a marked improvement for the first time since December.

The S&P Global Purchasing Managers’ Index (PMI) rose marginally to 50.9 in March from 49.7 in February, posting above the 50 mark — which separates an expansion in activity from contraction. 

“March’s PMI data brought about positive signs of Hong Kong’s business conditions improving again. All five components of the PMI showed signs of improvement, supporting the latest rise in the headline PMI,” said Pan Jingyi, economics associate director at S&P Global Market Intelligence. 

The reading was in line with the expansion of business activity in the Chinese mainland. The official PMI released by the National Bureau of Statistics this week, which covers large and state-owned companies, grew to 50.8 last month from 49.1 in February. The non-manufacturing PMI rose to 53 from 51.4 the previous month.

Also, new orders for Hong Kong’s private sector in the year-to-date recorded their first expansion, albeit marginal. The construction sector experienced the most significant increase in new projects.

“The renewed rise in new orders was especially noteworthy, marking only the second time that new business has increased in the past nine months,” said Pan.

Furthermore, cost pressures eased for Hong Kong’s private sector firms with average input prices rising at the slowest rate in three years, said Pan, adding that output price inflation was also modest despite rising from February. 

However, new business coming from overseas and the mainland continued to contract, and the rate of decline accelerated towards the end of the first quarter. According to a statement accompanying the data, the inflow of new business from sources outside Hong Kong was impacted by a decrease in tourist demand and unfavorable external conditions. 

Despite these challenges, the rise in new projects helped mitigate the decline in overall business activity, which only experienced a marginal decrease in March. When analyzing specific sub-sectors, output decline was primarily seen in manufacturing and services, while construction wholesale and retail sectors showed growth.

Meanwhile, employment levels in the private sector rose at the fastest pace in nearly a year during March. Stocks of purchases also accumulated at a solid rate due to a reduction in business activity and new sales increased, as noted by survey participants.  

Pan noted that sentiment across the private sector of Hong Kong remained weak. Companies expressed concerns about subdued economic conditions and increased competition potentially dampening sales in the upcoming year.

“This showed that firms are not yet convinced of a sustained rebound in output,” Pan said.