22 May 2003 | Robin Parker
Hong Kong's economy is reeling from the impact of the deadly Sars virus, which has caused purchasing figures to plunge to record lows.
The April purchasing managers' index (PMI) for the region, compiled by NTC Research, fell by 10.3 points to 38.1, significantly below the 50 mark that indicates no change and the lowest figure in its five-year history.
Two-thirds of the 250 firms polled said activity declined during the month, and they cited the Sars scare as the primary cause. Suppliers were, however, able to cut lead times owing to the shortages in demand.
The sharpest fall was in new orders, from 47.4 to 31.1, as overseas purchasers deferred, curtailed or cancelled visits. One firm reported a 75 per cent drop in orders compared with March.
Businesses said this put further strain on order volumes already suffering from the global economic uncertainty caused by the conflict in Iraq.
Some manufacturers also disrupted supplies by putting factories under quarantine for up to a fortnight because of suspected Sars cases.
Multinational companies, including electronics giant Sony, have sought to minimise disruption by getting mainland suppliers to build a "buffer" inventory to maintain supply lines.
Paul Ng, deputy chairman of the Hong Kong branch of CIPS, said several regional trade shows, which had been expected to generate new business, were cancelled.
"Not only are no buyers coming, other supply chain people, such as engineers, designers, quality inspectors, and logistics managers, are also deferring or cancelling their trips.
"With virtually no visitors, and local customers advised to keep themselves away from public places, the response of business is to try all possible means to cut and contain their costs.
Inventory and staff are the hardest hit."
The retail and leisure industries have suffered badly during the epidemic, with airlines particularly affected.
British Airways said it carried 27.3 per cent fewer passengers in the Asia Pacific region last month, and Hong Kong carrier Cathay Pacific has cut 47 per cent of flights and deferred payments to suppliers.