HSBC: Economy expands for 15th consecutive month

Hong Kong's private sector economy grew at its fastest pace in five months in October - the 15th consecutive month of economic expansion - according to a survey released Wednesday by HSBC.

The HSBC Hong Kong Purchasing Managers Index (PMI), a headline indicator of the city's business conditions, rose to 53 in October from 52.8 in September, signaling a further strengthening of Hong Kong's private sector economy. A reading above 50 indicates expansion.

The October data was the highest since May.

Commenting on the latest PMI report, Mark McCombe, chief executive of HSBC in Hong Kong, said: "Hong Kong's economy is set for a strong finish this year. Inflationary pressures can be felt in the domestic economy, but this is unlikely to have a material impact in the run up to the year end."

The uptrend was led by a solid rise in new order volumes, with new business received from the mainland returning to growth after recording a contraction in September.

Output growth also accelerated during the month at its fastest pace since April, reflecting a marked rise in new order volumes.

Meanwhile, employment in the private sector rose for the 13th consecutive month in October as companies responded to higher output requirements. Yet, despite the increase, October saw the weakest growth in headcounts since January.

According to the HSBC chief executive, the job market will remain robust going forward "as the city continues to benefit from its trade and business integration with the mainland". This will in turn help boost local confidence and domestic demand, McCombe noted.

Similarly, the "domestic demand" factor was also mentioned by HSBC economist Donna Kwok as a factor in keeping business conditions healthy. The firm job market as well as "seemingly indefinite easy money conditions - at least for the next 12 months", are encouraging local households and businesses to spend, thus "firing up the economy's internal engine of growth", Kwok told China Daily.

However, Kwok warned of an uptick of inflationary pressures that "may not pose a material risk until 2011" as rising wages and housing rentals are stoking price pressures from inside the economy, and a weakening US dollar and higher global food prices are stirring up those on the outside.

The HSBC Hong Kong PMI Report is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 300 companies and is derived from individual indexes measuring several aspects of the private economy including new orders, output, employment, suppliers' delivery times and stocks of goods purchased.

China Daily

(HK Edition 11/04/2010 page3)