Hong Kong PMI drops in December

Slowing down of business with the mainland cited as cause.

The HSBC Purchasing Managers' Index (PMI) fell slightly to 51.7 in December from 52.2 in November indicating that manufacturing continues to be weighed down by a decrease in new orders from Mainland China. The new orders sub-index decreased to 48.1 in December from 52.0 in November.

The softening of new business inflows from the mainland is a concern, but can partly be attributed to a slowdown in post-Christmas orders, said HSBC.

For the fourth quarter as a whole, however, PMI averaged 51.5, an improvement from 50.2 in the third quarter. This was the highest quarterly reading since the first quarter of 2012, said HSBC. The output sub-index rose to 53.7 in December, increasing at its fastest pace since February

The bank said that with the fourth quarter's average PMI notably stronger than the previous quarter's average, and retail sales growth holding firm, Hong Kong should see further improvement in the next GDP announcement.

On the whole, however, new orders rose 52.9 in December, and grew for the second straight month. This sub-index tracks overall new business in Hong Kong.

HSBC said respondents widely cited improved economic conditions, suggesting that demand at home and from abroad is generating more than enough of a counterbalance to the slowing down of business from the mainland.

Hong Kong's economy is expected to strengthen this year with healthy local job market conditions still underpinning domestic demand. The PMI also noted that employment in the private sector rose for the third consecutive month in December as firms hired more staff to meet greater output requirements.