Hong Kong Business Outlook Plunges to Record Low on Virus

(Bloomberg) -- Hong Kong's business outlook fell to a record low in February as the coronavirus outbreak snuffed out an emerging stabilization in the city's battered economy.

The purchasing managers' index for Hong Kong's economy fell to 33.1, dropping below the previous low in April 2003, according to IHS Markit. The PMI averaged 39.9 so far for the first quarter, the report said. The gauge has been below the 50 level that divides expansion and contraction since April 2018, though it had risen in December and January.

Markit surveys about 400 private-sector companies in Hong Kong across manufacturing, construction, wholesale, retail and services to generate the index. Survey responses are collected in the second half of each month.

“The latest PMI flashed red warning lights on the dire private-sector conditions across Hong Kong in February amid the coronavirus outbreak, with the headline index plunging to an unprecedented level since the survey started in July 1998,” Bernard Aw, principal economist with IHS Markit, said in the report. “The average PMI so far for the first quarter of 2020 points to a deepening recession, raising the urgency for policy support.”

The latest decline is among the first indicators of the true impact of the coronavirus outbreak that hit Hong Kong in earnest at the end of January, compounding the pain for an economy which posted its first annual economic contraction in a decade last year after months of anti-government protests. Retail sales by value plunged in January, down for a 12th straight month, according to data released Monday.

Financial Secretary Paul Chan projected the economy would grow in a range of -1.5% to +0.5% this year in his budget presentation last week. The budget included a HK$120 billion ($15.4 billion) relief package featuring a HK$10,000 cash handout to permanent residents age 18 and older to spark consumption, as well as tax breaks and funding for various industries.

“Giving a cash handout and appealing to people to come out to spend, encouraging the business sector to come up with incentive programs to complement this initiative from the government, I think people will of course depending on their own personal circumstances, support us and support Hong Kong,” Chan said in an interview with Bloomberg Television on Monday.

--With assistance from Matt Turner.

To contact the reporter on this story: Eric Lam in Hong Kong at elam87@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger, Jodi Schneider

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