Employment gains, as new orders increase for 10th straight month

The growth in the city's private sector economy accelerated further in April at the fastest pace in three months, thanks to robust growth in new business from the mainland and an improving local job market, according to the latest survey by HSBC on purchasing managers.

The HSBC Hong Kong Purchasing Managers Index rose to 55.3 in April from 54.9 in March, the survey released Wednesday noted.

The April figure signaled an expansion in the private sector economy for the ninth consecutive month.

A reading above 50 signals an expansion in the private sector and improvement in the business conditions, while a reading below 50 indicates deterioration and contraction.

"Hong Kong's PMI continued to strengthen in April, signaling increased business activity. The mainland is still our major driver of new business with growth in new orders rising to the series' historical high. This will benefit employment as well as private consumption in the city," said Mark McCombe, chief executive of HSBC Hong Kong.

Production growth accelerated since March, supported by improving economic conditions which boosted consumer confidence.

New orders increased for the tenth straight month, with new business received from the mainland rising at its fastest pace in the survey's history.

The city's employment in the private sector, meanwhile, has increased for the seventh successive month in April, reflecting the sustained rise in new work, which supported another rise in output.

Nevertheless, backlogs of work continued to increase for the past ten successive months, suggesting that pressures on operating capacity persisted in the city's private sector.

"Since purchases had increased in line with higher output requirements, suppliers' delivery times subsequently slowed in April, as operating capacity at vendors was tested under the increased demand," Qu Hongbin, the bank's chief economist for China, commented in the report.

Overall input costs increased substantially during April, fueled by both higher purchase prices and wages. Output prices, on the other hand, rose at the fastest pace since July 2008, contributing to inflationary pressure.

"While growing demand is causing price pressure to build up, the modest underlying inflation in Hong Kong suggests this is still manageable," McCombe added.

The HSBC Hong Kong PMI is derived from indexes measuring changes in different aspects of the private sector economy including output, new orders, employment, suppliers' delivery times and stocks of goods purchased.

China Daily

(HK Edition 05/06/2010 page2)