9 March 2017
HKTDC Export Index 1Q17: Across-the-board Rise in Export Confidence
The HKTDC Export Index monitors the current export performance of Hong Kong traders and gauges their near-term prospects.
- In 1Q17, the HKTDC Export Index rebounded to 47.1 from 33.7 in 4Q16, a clear indication that export confidence is improving.
- Broad improvement was seen across all of the major industries, with the machinery sector reporting the highest reading (50). All of the other industries, however, remained below the 50 watershed level, reflecting the persistence of a pessimistic outlook.
- Export confidence was up with regard to all of the major markets. Of these, the US inspired the highest level of confidence in 1Q17 (50.3), followed closely by Japan (49.8) and the Chinese mainland (49.5). At 48.7, the EU was the worst performer.
- With regard as to whether Brexit had affected their export performance, 86% of respondents (83% for 3Q16) reported no impact to date, while 13% (17% for 3Q16) indicated a negative impact. Among those affected, most intended to respond by developing new markets, downsizing their company or hedging against the risk of counterpart default.
- Asked to assess the likely impact of the threats of US protectionism stemming from Trump’s administration, 71% of respondents said they expected their export performance to remain unaffected, while 27% anticipated a negative outcome. Among those expecting to be affected, most would respond by looking to develop markets outside of the US and by enhancing their competitiveness through increasing the added value of their products.
- On the supply side, respondents reported steady labour cost pressure on the mainland. Overall, 47% of respondents had experienced higher mainland labour costs during 1Q17, compared with 48% in 4Q16, 44% in 3Q16 and 53% in 2Q16.
- The post-CNY labour shortage problem was said to have eased. Some 20% of the surveyed companies said they or their suppliers had experienced labour shortages after CNY this year, compared with 50% in 2016. Of these, 39% said the post-CNY labour shortage problem was more acute than last year, while a further 59% maintained that the situation was more or less the same this year.
In 1Q17, the level of overall HKTDC Export Index rebounded strongly to 47.1 from 33.7 in 4Q16. Overall, exporters were far less pessimistic with regard to their likely export performance over the short-term.
Broad improvement was seen across the major industries in 1Q17. The machinery sector index went up to the watershed of 50, the highest among the major industries. All other industries reported higher readings, but stayed in negative territory. The clothing sector index rebounded to 38, but remained the most pessimistic of all the major industries.
In 1Q17, export confidence improved with regard to all of the major markets. The index for the US increased to 50.3, the highest reading for any of the major markets and indicating a return to expansionary territory. While the indices for Japan and Chinese mainland rose to slightly below 50, the index for the EU was 48.7, slightly behind the other major markets.
In 1Q17, the Offshore Trade Index edged down to 33 from 35.2 in 4Q16, indicating a drop of exporter confidence in offshore trade performance (i.e. those shipments not passing through Hong Kong, but handled by Hong Kong exporters). With a lower reading than the HKTDC Export Index, Hong Kong’s offshore trade is expected to underperform Hong Kong’s overall exports in the near term.
In 1Q17, the Trade Value Index edged up to 48 from 41.6 in 4Q16. While all sectors reported higher readings in 1Q17, the indices for machinery and timepieces climbed above 50, back into expansionary territory. The clothing sector index increased to 41.1 in 1Q17, but remained the lowest of all the major industries. Readings below 50 indicate the likelihood of lower unit prices in the near term.
In 1Q17, the Procurement Index increased to 41.8 in from 34.4 in 4Q16. While this indicated an improved procurement sentiment, a reading below the watershed mark of 50 suggests the possibility of a fall in input costs and/or sluggish future demand. In 1Q17, the procurement indices for all of the major industries went up, with the largest rise seen in the machinery sector, which increased from 32.7 in 4Q16 to 43.8 in 1Q17.
In 1Q17, the Employment Index climbed slightly to 47.1 from 45.1 in 4Q16. With the exception of the toys sector, every industry showed higher readings than in the previous quarter. Readings below 50, however, still signal the likelihood of labour contraction in the near term. Overall, hiring confidence was the highest in the jewellery (48), electronics (47.8) and machinery sectors (47.5).