Hong Kong's April PMI Drops to 48.6, New Nine-Month Low

Overview

This macro research report by Goldman Sachs tracks the purchasing managers' index (PMI) data for Hong Kong in April 2026. The overall PMI dropped from 49.3 in March to 48.6 in April, marking its lowest level since July 2025, indicating continuous contraction in the private economy. The report analyzes changes in various PMI sub-indices to assess trends in employment, supply-demand dynamics, and pricing pressures.

Core views

Continued Deterioration in Overall Sentiment: Hong Kong's PMI fell to 48.6 in April, continuing its contraction trend. Significant Drag from Employment and Inventory: Among major indices, the employment sub-index saw the largest decrease, dropping from 51.2 in March to 49.0 in April; inventory also decreased slightly (from 52.5 to 51.8). Additionally, faster supplier delivery times (delivery sub-index rose from 50.3 to 51.7) mechanically pulled down the overall PMI. Output dipped marginally to 48.3, and new orders increased slightly to 47.6, both remaining in contraction territory. Mixed External Demand: External demand showed mixed results in April. The new exports sub-index significantly rebounded to 51.4 (from 46.8), while new business from China dramatically fell to 48.4 (from 51.7), moving from expansion to contraction. Increasing Downstream Profit Margin Pressure: Input prices surged sharply to 58.8 (from 52.6), reaching their highest level since October 2011, primarily due to rising raw material costs. In contrast, output prices only slightly rose to 53.8 (from 51.7), and labor costs slightly dropped to 51.9. The increase in input costs far outpaced the rise in output prices, meaning downward pressure on profit margins of downstream industries. Despite companies actively procuring due to expectations of higher raw material costs, procurement growth has slowed.

Analysis framework

The report employs a standardized PMI analysis framework. First, it observes changes in overall PMI values and absolute levels (whether above or below the 50 threshold) to determine economic sentiment trends. Second, it breaks down PMI into key components (such as output, new orders, employment, inventory, and supplier delivery) to identify specific factors driving or pulling down the overall index. Finally, the report closely examines price movements, comparing input prices (cost side) and output prices (sales side) to derive insights into profit margin pressures faced by downstream enterprises, linking macroeconomic conditions with micro-level profitability.

Methodology notes

• Cyclical and Sentiment FrameworkSentiment Turning Point Analysis

  Use of PMI Index and 50 Threshold to Determine Economic Cycle

  The PMI uses 50 as the dividing line between expansion and contraction (the threshold). Values above 50 indicate month-over-month economic expansion, while those below suggest contraction. By observing Hong Kong's PMI fall to 48.6, the report determines that the economy is continuously contracting and notes this is the lowest reading since July 2025, implying no recent short-term turning point in the cycle.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Input Price and Output Price Spread Reflects Corporate Profit Pressure

  Input prices represent corporate raw material costs, while output prices reflect product selling prices. When input price increases greatly exceed output price increases (i.e., when the spread widens), corporations cannot fully pass cost increases onto downstream consumers, leading to squeezed profit margins. Based on this analysis, the report concludes that profit margin pressure in Hong Kong's downstream industries is intensifying.

Key data

• Overall PMI for April48.6Below 49.3 in March, the lowest since July 2025
• Employment Sub-index49.0A sharp drop from 51.2 in March, the main drag on PMI
• Supplier Delivery Sub-index51.7An increase from 50.3 in March, faster deliveries mechanically pull down the PMI total
• New Export Orders Sub-index51.4A significant rebound from 46.8 in March
• New Business from China Sub-index48.4A dramatic drop from 51.7 in March, falling back into contraction
• Input Price Sub-index58.8A sharp increase from 52.6 in March, the highest since October 2011
• Output Price Sub-index53.8A slight increase from 51.7 in March

Impact & implications

Further declines in PMI indicate that Hong Kong's private economy still faces substantial contractionary pressures in April 2026. Particularly, the significant deterioration in the employment sub-index and the sharp surge in costs imply that businesses are becoming more cautious about hiring, and rising raw material costs are eroding the profit space of downstream industries. The drop in new business from mainland China from expansion to contraction suggests the need to monitor how changes in domestic demand impact Hong Kong's economy.