Hong Kong’s private sector is bucking the downward trend seen elsewhere in Asia, recording growth for the first time in three months in July, according to HSBC’s survey on purchasing managers.

Business conditions across Hong Kong’s private sector improved last month with the HSBC PMI rising to 50.3 in July, up from 49.8 a month earlier, the latest survey by HSBC on purchasing managers showed on Friday.

A reading above 50.0 indicates expansion, while a figure below that level signals contraction. The July PMI reading was also the first reading above the 50 no-change threshold in three months, signaling a stabilization of conditions in the city, said HSBC.

July’s output and new orders sub-indexes expanded at 50.4 and 50.2 respectively compared with 49.2 and 50.3 in June. “New business from the mainland”, however, was registered at 46.8 last month over 46.5 previously, signaling continuous subdued business conditions with the city’s most important business partner, according to the bank.

Despite the impact of the weak European and mainland demand continually weighing on sentiments, lower raw material prices, more favorable currency movements and resilient domestic demand are keeping businesses humming and job market conditions stable, said Donna Kwok, Greater China economist from HSBC.

“Most critically, wages are still rising, helping to underpin household demand and buying more time for growth until a soft mainland landing is secured,” said Kwok.

However, the wage hikes in Hong Kong grew at a slower pace in July, with the sub-index registered at 50.9 over June’s 52.4. At the same time, the sub-index for employment contracted for the third straight month, with a reading of 48.8 in July from 48.7 previously. HSBC indicated that respondents flagged the reduction in headcount remained modest, generally due to staff resignations.

Kwok commented that July’s PMI reading will bring some relief to investors as a promising start to the third quarter.

“However, the underlying strength of this turnaround has yet to be tested. Until the contraction of mainland new orders is stemmed, questions will remain over the sustainability of Hong Kong’s growth,” said Kwok.

On July 10, the city’s Financial Secretary John Tsang said Hong Kong should be able to attain GDP growth of 1 to 3 percent in real terms this year, barring any further blows to world financial markets.

But Hang Seng Bank at the same time revised its GDP growth forecast to 2 percent from 3 percent, citing the impacts of faltering external demand that have filtered through to Hong Kong’s domestic demand as well as the sharp slowdown of consumer spending on big ticket items.

“Of particular note, the mainland which has for several years been the flag bearer of global growth also shows clear signs of slowing,” economists Ryan Lam and Joanne Yim wrote in the report.

According to the PMI data released on Wednesday by the China Federation of Logistics and Purchasing and the National Bureau of Statistics, the manufacturing sector on the mainland expanded at its slowest pace in eight months last month, with the sector’s PMI easing to 50.1 percent in July, down 0.1 percentage points from the previous month.

litao@chinadailyhk.com