By Fiona Law
HONG KONG--The HSBC Hong Kong Purchasing Managers Index rose to 52.5 in January from 51.7 in December due to a solid increase in output and new orders, signaling the strongest improvement in private sector business conditions in 11 months, HSBC Holdings PLC said Tuesday.
A reading above 50 represents an expansion in manufacturing activity, while a reading below signals contraction.
Hong Kong's steady recovery has been strengthened further by the renewed expansion of orders from mainland China as growth in the world's second-largest economy picks up, HSBC Greater China economist Donna Kwok said.
But she noted that inflation would be a concern in the near term amid Hong Kong's recovery.
"Robust demand conditions continue to fan inflationary pressures, an issue that will likely resume dominance in policy maker concerns again by mid-year, especially as business activity picks up additional momentum," Ms. Kwok said.
The sustainability of jobs-driven domestic demand is another concern. During the month, private sector employment in the city fell, following a three-month sequence of job creation, she said.
The HSBC PMI is calculated using indexes measuring changes in output, new orders, employment, suppliers' delivery times and stocks of goods purchased. It is based on a survey of about 300 companies prepared by Markit Economics.
Write to Fiona Law at [email protected]