The S&P Global Hong Kong PMI survey indicates that Hong Kong's economy remained in expansion but slowed further in June, with the survey's headline index dipping to 50.3 in June after slumping to 50.6 in May from 52.4 in April. It is the slowest pace in the current six-month sequence of expansion.

New orders posted a slower increase as higher tourism activity led to only a marginal rise in new business. Rates of expansion in new orders from abroad and Mainland China also decelerated to the softest since January.

The increase in business activity was led by construction and consumer services sectors. Job cuts were seen manufacturing as well as the wholesale and retail segment.

Business confidence rose to the highest level since March, with surveyed firms expressing hopes that the upturn in economic conditions will persist and help to drive sales in the next 12 months.

Overall input cost inflation eased to the slowest rate in a year in June. Softer hikes in business expenses were due primarily to stagnating purchase price inflation, as wage inflation accelerated from May. Amid slower demand, Hong Kong firms raised their charges to clients at the slowest rate in the year-to-date.

The Nikkei Hong Kong PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 300 companies. The panel is stratified by company size and by Standard Industrial Classification (SIC) group, based on industry contribution to Hong Kong GDP. Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the ‘Report’ shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the ‘diffusion’ index. This index is the sum of the positive responses plus a half of those responding ‘the same’.

The Purchasing Managers’ Index is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers’ Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times index inverted so that it moves in a comparable direction.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.

The Purchasing Managers Index (PMI) survey has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.