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Hong Kong Private Sector Contracts Further in April as Costs Surge

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-- Hong Kong's private sector business conditions deteriorated for a second straight month in April as output and new orders declined amid sharply higher costs linked to the war in the Middle East, according to data released Wednesday by S&P Global.

The S&P Global Hong Kong SAR Purchasing Managers' Index fell to 48.6 in April from 49.3 in March, marking the sharpest deterioration in business conditions in 10 months.

Output contracted at the fastest pace since June 2025, while new orders declined for the second consecutive month as firms cited subdued economic conditions and weaker customer demand.

Demand from mainland China also weakened for the first time in seven months, although new export orders returned to growth.

Input costs rose at the fastest pace since October 2011, driven by surging raw material, oil, and fuel prices following the outbreak of war in the Middle East. Selling prices also increased at the quickest pace since August 2023 as firms sought to protect margins.

Businesses remained pessimistic about the year-ahead outlook, with concerns centered on geopolitical uncertainty and intensifying market competition.

"The S&P Global Hong Kong SAR PMI data for April pointed to another deterioration in business conditions, signalling a muted start to the second quarter of the year," Usamah Bhatti, economist at S&P Global, said.

"Firms commonly linked the latest deterioration in conditions to the war in the Middle East and its associated impact on prices, in particular for oil and fuels," he added.

Backlogs of work fell for a second straight month, while employment declined for the first time in three months as firms reduced headcount through downsizing and non-replacement of voluntary leavers.

Despite weaker demand conditions, purchasing activity and input inventories continued to rise as firms sought to build stocks ahead of further increases in raw material prices.

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