Protests, trade war push HK Aug business activity to lowest since Feb 2009 - PMI

FILE PHOTO: A general view of the financial Central district in Hong Kong, China July 25, 2019. REUTERS/Tyrone Siu

HONG KONG (Reuters) - Hong Kong’s private sector activity declined at the fastest pace in more than a decade in August, a business survey showed on Wednesday, as an escalating trade war and local political unrest hit all aspects of demand.

The IHS Markit Hong Kong Purchasing Managers’ Index (PMI) sank to 40.8 in August from 43.8 in July, signalling the steepest deterioration in the private sector since February 2009.

“The latest PMI data reveal a Hong Kong economy flirting with recession in the third quarter as business activity is increasingly aggravated by protest-related paralysis,” said Bernard Aw, Principal Economist at IHS Markit.

Hundreds of thousands of people have taken to the streets since mid-June in protests calling for greater democracy in the former British territory. The demonstrations pose a direct challenge to Beijing, which has accused foreign powers, particularly the United States and Britain, of fomenting unrest.

Both the trade headwinds and political crisis have fanned business pessimism, with confidence slumping to its lowest on record, the survey showed.

New orders continued declining and at the sharpest pace since February 2009, dragged by a record decline in new business from mainland China.

Hong Kong is on the verge of its first recession in a decade as the economy shrank 0.4% in April-June from the previous quarter, data showed, as increasingly violent protests turned away tourists and hit retail sales in one of the world’s most popular shopping destinations.

Reporting by Meg Shen; Editing by Sam Holmes