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Business activity in Hong Kong grew for the first time this year in April but companies were slow to celebrate as orders from China continued to contract and expectations for the year ahead remained negative, according to a gauge of private sector conditions.

The Nikkei purchasing managers’ index for Hong Kong’s private sector rose to 51.1 in April, ending a three-month stretch of contraction and breaking above the 50-point line separating contraction from growth.

The survey reading was the strongest in 38 months and was driven by a return to growth in new orders for the first time in more than two years. Output grew for a second month straight and at the fastest rate since February 2015, though still at a marginal rate.

Purchasing activity and inventories rose in response to anticipation of greater output and input prices grew at the fastest-equal pace in three years, but prices charged to clients grew only marginally and employment levels remained stagnant.

New orders from mainland China continued to shrink as well, notching a 33rd month of contraction, albeit at the slowest pace in seven months.

A sub-index on future output remained in negative territory but came closer to the 50-point mark than it has been in almost two years, as only 8.6 per cent of companies said they expected output to fall in the coming 12 months.

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