The January global Hong Kong Purchasing Managers' Index (PMI) rose to 52.3, with export orders seeing the highest growth in nearly three years.

The S&P Global Hong Kong Purchasing Managers' Index (PMI) for January, after seasonal adjustment, increased from 51.9 in December last year to 52.3, reflecting a sustained and strong improvement in Hong Kong's business environment. Business activity has increased for six consecutive months, with the expansion rate remaining stable month by month, showing overall significant improvement. Industry data shows that the increase is driven by the service sector, followed by the wholesale and retail sector, while the manufacturing and construction sectors are moving in the opposite direction. It is worth noting that the increase in export orders is close to a three-year high. During the period, new orders also increased substantially, with the expansion rate reaching the second highest level since May 2023, closely following November last year. Many respondents often stated that companies adjusted market strategies and introduced new products, successfully boosting sales. At the same time, demand from overseas and mainland markets has also improved at the beginning of this year. In fact, the increase in export orders is close to a three-year high. The improvement in orders prompted a two-month increase in backlogged work; as manpower was reduced, the rate of accumulation of unfinished orders increased month by month. Many respondents stated that companies did not fill vacancies left by departures, leading to a decrease in staff numbers; however, the overall reduction in positions was not significant. Entering the new year, companies are more actively procuring. The latest data shows that due to expanded sales channels and deliberate inventory replenishment, the quantity of purchases has increased. On the other hand, the speed of expansion of procurement inventories is the highest in seven months. Companies stated that although demand for input materials has increased, delivery performance by suppliers in January has improved for two consecutive months. The rate of input cost increase in January slowed month by month, but remained significant overall. Companies revealed that raw material prices increased month by month, with many citing the skyrocketing procurement prices as the reason for cost escalation. In addition, employee costs are moderately rising, with the increase slowing to the smallest since September last year. Although companies have tried to pass on costs to customers by raising prices, many have provided discounts to stimulate sales, resulting in a moderate overall increase. Despite improved market demand, business sentiment in January remained pessimistic about the outlook for the coming year, with negative sentiment intensifying to the most pronounced in five months. Businesses cited factors such as US trade policies, fierce market competition, and global economic downturn as putting pressure on future production performance. However, many companies have clearly stated that they have confidence in the ongoing prosperity of the local economy. Usamah Bhatti, economist at S&P Global Market Intelligence, stated that as business purchasing activity becomes more active and backlogged orders continue to increase, this indicates that commercial activity will continue to grow in the first quarter in line with customer demand.