Hong Kong's private sector firms saw a renewed deterioration in operating conditions in March amid declines in output and total new business, according to data released Wednesday by S&P Global.

Hong Kong's seasonally adjusted S&P Global Hong Kong SAR Purchasing Manager's Index slipped below the 50 threshold to 49.3 in March from a 35-month high of 53.3 in February.

The lower PMI, which marked the first reduction since last July, reflected a decline in total new business placed with Hong Kong's private sector firms, the report said.

The reduction came following a historically strong five-month expansion period. Panellists said the Middle East conflict lowered sales amid a dampened consumer confidence and spending, as well as stock market performance.

Total new export business dropped solidly in the month after four months of growth, whereas demand from mainland China jumped for the sixth month in a row, although at a slower speed.

Purchasing activity also increased at the sharpest rate in three years in March amid new projects, an increase in new work in previous months, and firms boosting purchases of inputs ahead of potential supplier price hikes. Stocks of purchases rose at the strongest pace in nine months.

Overall input costs and selling prices increased at slower rates, reducing inflationary pressures. Private sector firms raised their selling prices at a weaker rate in March.

Outlook for business activity was pessimistic in March, with a negative sentiment most pronounced since last June. Many companies linked dampened forecasts to the war in the Middle East.