(Bloomberg) -- Hong Kong’s business outlook continued to drop in October, indicating that there will be no immediate pickup from the recession in the city which is facing a global trade slowdown and domestic political unrest and violence.
The purchasing manager’s index for the whole economy dropped to 39.3. the worst result since the depths of the financial crisis in November 2008, according to IHS Markit, which surveyed about 400 private sector companies. Output fell to 32.3, the lowest reading since the series began and well below the 50 level that separates expansion from contraction.
Hong Kong’s economy contracted sharply in the third quarter, amid months of violent protests in the streets and ongoing headwinds from the U.S.-China trade war. Tourism has plummeted across the board, especially arrivals from mainland China, which accounts for almost 80% of all visitors to the city.
“The ongoing political unrest and impact of trade tensions saw business activity fall at the sharpest pace since the survey started over 21 years ago. Anecdotal evidence revealed that the retail and tourism sectors remained particularly affected,” Bernard Aw, principal economist at IHS, said in the release. “As new orders continued to fall sharply, led by a record decline in demand from mainland China, firms were becoming increasingly pessimistic about the outlook.”
The city will probably have to cut it’s full-year growth target from the current level of 0-1%, Financial Secretary Paul Chan said on his official blog over the weekend, after data showing the economy entered a technical recession. Retail sales dropped for an eighth month in September, as tourists stayed away amid the violent protests.
“In a sign of growing pessimism, firms cut back further on their purchasing activity and input inventories in October, reducing both at a rate not seen since the survey started in July 1998,” IHS said in the report.
