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Hong Kong Private Sector Contracts in August Amid Subdued Demand, S&P Survey Shows

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Hong Kong Private Sector Contracts in August Amid Subdued Demand, S&P Survey Shows

Business conditions in Hong Kong's private sector deteriorated in August for the first time in four months, as demand and output weakened amid subdued market conditions.

The headline seasonally adjusted S&P Global Hong Kong SAR Purchasing Managers' Index (PMI) dropped to 49.5 from 51.0 in July, according to data on Thursday. A reading below the neutral 50.0 threshold indicates a contraction in sector activity.

The decline was driven by renewed contractions in output and new business, marking the third time in six months that sales have dropped. New export orders also declined, despite a slight increase in demand from mainland China.

"Firms often linked the latest deterioration to subdued market conditions, both locally and globally, which have been exacerbated by high prices," said Usamah Bhatti, an economist at S&P Global Market Intelligence.

The ongoing conflict in the Middle East also continued to weigh on supply chains, lengthening delivery lead times for local firms. Additionally, the drop in output and a decrease in backlogs of work weighed on the jobs market, leading to reduced staffing levels, S&P said.

The private sector contraction follows a broader economic moderation. Hong Kong's gross domestic product grew 4.3% year on year in the second quarter, slowing from the 5.9% expansion recorded in the first quarter.

However, real GDP for the first half of 2026 still rose 5.1% year on year, marking the strongest first-half performance in nearly five years, according to government data. Authorities expect strong global demand for artificial intelligence-related electronic products and corresponding logistics services to help support broader economic growth through the second half of the year.

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