S&P Global's seasonally adjusted PMI for Hong Kong fell to 51.9 in December last year, recording growth for five consecutive months

S&P Global's Hong Kong Purchasing Managers' Index (PMI) for December last year, seasonally adjusted, fell from 52.9 in November to 51.9, reflecting a moderate improvement in the business environment and recording growth for five consecutive months. Overall, private enterprises have increased production for five consecutive months; although the increase in December was lower than the previous survey month, it was still significant and among the highest in the past three years. Survey data revealed that demand continued to warm up, driving recent production growth.

Respondent companies indicated that new orders continued to rise until the end of 2025, with the increase roughly in line with production expansion, marking the second highest since May 2023, second only to November last year. The survey data revealed an increase in the number of consumers, coupled with a restoration of client confidence, which has benefited recent sales. The data also reflected a significant increase in new business from both domestic and overseas markets, supporting the overall order growth.

Looking at the most recent survey month, purchasing activity became more active, but the expansion rate slowed compared to November. Companies generally stated that the growth in purchasing quantities was consistent with the degree of demand improvement. Meanwhile, purchasing inventories have risen for seven consecutive months, although the increase was not large. Companies also noted that suppliers have improved their on-time delivery performance for the first time since June.

The continuous rise in new orders has led to a return to expansion in backlogs by the end of 2025, with the increase, although not large, being the most significant since December 2024; however, companies have tended to respond by streamlining staff through natural attrition.

In terms of prices, overall input costs remained high in December last year. Specifically, the increase in costs was partly due to rising raw material prices, which in turn drove up purchasing prices, while employee costs also reached the highest level since July 2024. In the face of high costs, Hong Kong private enterprises raised selling prices, marking the highest increase in 26 months to alleviate profit pressure.

Looking ahead to production in the coming year, the pessimism among Hong Kong private enterprises in December has lessened compared to the previous month. Notably, many companies expressed optimism about the local economy, making the overall negative outlook the least severe since July 2023; however, companies remain concerned about the global economic climate and tariff impacts.

Usamah Bhatti, an economist at S&P Global Market Intelligence, stated that the business environment further improved in December last year, marking the best quarterly performance since the first quarter of 2023. Demand from both domestic and export markets has broadly improved, driving considerable growth in production and new orders, encouraging companies to actively procure in line with production needs. The forward-looking index is also encouraging, with the backlog index reflecting capacity constraints breaking a year-long downward trend for the first time, indicating that as demand and new orders become more active, production capacity is expected to further expand.

Additionally, Bhatti noted that the pessimism among operators regarding production in the coming year has diminished to the shallowest level since mid-2023, especially regarding the outlook for the local economy, which is now viewed with greater confidence