January 26, 2022
HONG KONG – Business confidence among Hong Kong’s small and medium-sized enterprises has remained stable despite the latest wave of the coronavirus pandemic, but rising costs and wages continue to add pressure to their operations, according to the latest survey by the Hong Kong Productivity Council on Tuesday.
Twenty-nine percent of SMEs expect overall employee salaries to rise, 13 percentage points higher than the previous quarter; and over 30 percent of SMEs plan to increase the price of goods and services to ease cost pressures
The Standard Chartered Hong Kong SME Leading Business Index dropped marginally by 0.1 quarter-on-quarter to 48.1 for the first quarter of 2022, the survey showed.
Recruitment sentiment and investment sentiment kept rising, with both scoring above 50 at 53.4 and 51.2 respectively, reflecting the confidence of local employers and investors under the pandemic.
Among the component sub-indices, the global economic index fell the most by 6.7 quarter-on-quarter to 44.2, as the global pandemic continued.
The potential for the latest round of the pandemic to slow economic recovery for one or two quarters might lead to a decline in business confidence in some sectors in the near future, said Kelvin Lau, senior economist for Greater China and global research of Standard Chartered Bank Hong Kong.
The survey interviewed 800 local SMEs, with the aim of understanding the outlook of local SMEs on the overall business environment in the coming quarter.
Among the three major industry indices, the import/export trade and wholesale increased 3.4 to 45.5 quarter-on-quarter and manufacturing rose 2 to 44.9, while the retail sector fell 3.7 to 46. The information and communications industry recorded the biggest growth this quarter with a leap of 7.3 to 56.2.
The rising number of Omicron cases in the city has led to renewed tightening of social distancing measures, which could hit the accommodation and food services sectors, while putting further pressure on already weak service sectors such as real estate, retail and transportation, Lau said, adding that he expects confidence in the accommodation and food services sectors to fall more sharply in the second quarter.
The survey also revealed that more SMEs are facing cost pressures as the proportion of respondents expecting increases in the cost of raw materials, staff salaries and the number of staff in the coming quarter is higher than the first quarter, with 72 percent of SMEs expecting higher costs for raw materials, a sixth consecutive quarterly increase. Twenty-nine percent of SMEs expect overall employee salaries to rise, 13 percentage points higher than the previous quarter; and over 30 percent of SMEs plan to increase the price of goods and services to ease cost pressures.
Hong Kong SMEs are facing a thorny start in 2022, with profits expected to remain under pressure as operating costs continue to rise, making it difficult for the component business index to move back above 50 in the near future, Lau said.