World News

Coronavirus sends Hong Kong Feb business activity plunging to record low: PMI

HONG KONG (Reuters) – The coronavirus epidemic dealt a severe blow to businesses in Hong Kong in February with activity plummeting to the lowest on record, a private survey showed on Wednesday, in a sign of a sharp economic downturn in the first quarter.

The adjusted IHS Markit headline Hong Kong Purchasing Manager’s Index (PMI) dived to 33.1 in February, from 46.8 in January and marked the steepest downturn since at least 1998, when the survey began. The previous record low, at 38.1, was posted during a 2003 epidemic of the Severe Acute Respiratory Syndrome, another coronavirus.

The 50-mark separates growth from contraction on a monthly basis.

The fast-spreading virus has killed nearly 3,000 people and infected over 80,000 in China, a vital source of trade for the city which has so far reported two deaths and around 100 cases.

The outbreak has dealt a double blow to Hong Kong’s economy and its retail and tourism sectors, which have been battered by months of political protests.

“Measures taken in response to the Covid-19 situation and general fear of being infected saw business activity and new sales sinking at a record pace in an economy that has been beset earlier by political protests and U.S.-China trade war tensions,” said Bernard Aw, principal economist at IHS Markit.

“Business confidence plummeted in the city, with a majority of firms anticipating lower future output amid expectations that the coronavirus situation will persist in coming months.”

Underscoring the virus’ debilitating impact on factories, the output gauge plunged to 22.5 last month, from 46.7 in January while that for new orders showed an equally steep dive to 22.7 from 43.0 the month earlier.

Demand from mainland China shrank to a survey-record low in February. There were also reports of a rise in order cancellations.

Business confidence, a forward-looking subcomponent in the survey, plummeted to the lowest level since the data were first available in April 2012, with a majority of survey respondents predicting lower output over the next 12 months due to concerns that the negative impact of the virus on activity was likely to persist n the months ahead.

Official forecasts for the Hong Kong’s economy range between a 1.5% contraction in 2020 and 0.5% growth. The government has announced a record budget deficit this year to tackle the impact of the virus and of months of often violent protests.

(Reporting by Meg Shen; Editing by Shri Navaratnam)