A Hong Kong purchasing managers’ index fell in July, reflecting a simultaneous contraction in private-sector output and new orders for the first time in 3- years, signalling overall economic growth is slowing sharply, the survey showed on Friday.

Orders were depressed by weaker demand at home and internationally last month and because some customers refused to pay higher prices, according to the survey.

The drop in the PMI follows an unexpected decline in the territory’s exports in June. Consumer spending continues to drive economic growth and remains solid but there are signs that rising inflation and a weak stock market are making consumers more cautious.

However, analysts say more months’ economic data is required to confirm the extent of the deceleration. A Reuters poll forecasts economic growth will ease to 5 percent this year, after averaging 7.3 percent annually over the past four years, but economists say risk is on the downside after the latest data.

The Hong Kong purchasing managers’ index (PMI), based on a survey of 300 private companies, measured a seasonally adjusted 49.4 in July, falling below 50 — the dividing line between growth and contraction in the private sector — for the first time since December 2004. It was down from 50.6 in June.

New orders were weak for a fourth straight month although in June they had nudged a tad higher, and business from China declined for a second consecutive month.

Companies also continued to face surging costs — which they could only partially offset by charging higher prices for their products — although cost inflation was not as high as in June.

In the manufacturing sector there were indications that output was being cut in order to use up existing stock of finished goods, according to the survey. Meanwhile a number of new orders had failed to materialise after customers failed to accept higher prices.

High plastic, chemical and fuel prices fed through to packaging, transport and food costs, forcing firms to pass those on to customers. Conversely, the employment component of the PMI increased, despite rising wage costs, although most firms kept staffing levels unchanged, the survey showed.

The PMI survey compares business conditions with a month earlier based on data from Hong Kong companies across industries including manufacturing, services, retail and construction.

Source: http://www.afxnews.com

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