Hong Kong PMI records 11-month high in November

November data pointed to a sharp and accelerated rise in Hong Kong private sector business activity, with firms benefiting from strong growth of new orders and an associated improvement in market demand (particularly from the Chinese mainland). However, price pressures continued to build in November and the latest inflation of overall input costs was the strongest in the 113-month survey history.

The seasonally adjusted Hong Kong Purchasing Managers’ Index (PMI) – a composite index designed to provide a single-figure indicator of economic performance – posted 56.2 in November, up from 53.0 in the previous month, to reach its highest level since December 2006. This was well above the long-run series average (51.5) and indicative of a strong improvement in overall business conditions.

“Overall input cost inflation accelerated to a survey-record high in November, as increased fuel and oil-related prices continued to place upward pressure on firms’ cost burdens,” said NTC economist Tim Moore. “Moreover, latest data pointed to the strongest rise in prices charged by Hong Kong private sector companies since the series began in November 1999, to highlight the upside risks to consumer price inflation. Meanwhile, the headline PMI picked up markedly in November and was underpinned by the sharpest rates of growth of business activity and new orders for ten months.”

Activity growth in the Hong Kong private sector picked up to its strongest for 10 months in November, largely reflecting a faster increase in new business. The latest expansion of incoming new orders was the sharpest since January, with a number of companies pointing to higher new order intakes from the Chinese mainland. The rate of new business growth from mainland China was the sharpest since this series began in March 2005.

Latest data pointed to a series record increase in prices charged by Hong Kong private sector firms, largely in response to a sharp rise in overall input costs. The rate of wage inflation accelerated to its most marked since February 2006, which some companies linked to tight labor market conditions. Data signaled the second-strongest rise in purchase prices since the series began in November 1999, reflecting increased fuel and raw material costs during the latest survey period.

Average purchase prices were also driven higher by robust growth of input buying in the November, with the latest rise in the most marked for nine months.

Strong activity and new business growth encouraged Hong Kong firms to add to their payrolls in November, with the pace of staff recruitment picking up from the previous month’s low. However, increased workforce levels did not prevent a further solid accumulation of backlogs of work during the latest survey period.