Private-sector business activity in Hong Kong contracted for a seventh month in January as the volume of new orders plunged amid weak global demand, prompting companies to cut more jobs, a purchasing managers' survey showed on Monday.

The survey's main index rose slightly for a second month but remained close to a five-and-a-half year low. Its seasonally adjusted reading of 40.3 for January was up marginally from 39.6 in December, but it was the fifth-lowest score in the PMI's 10-year history and well below 50, the dividing line between growth and contraction in business activity.

Volumes of new orders fell in January at the fourth-sharpest rate in a decade, reflecting weakening demand and fears of a prolonged economic slowdown, the survey showed. Volumes of orders from mainland China declined for an eighth straight month.

Hong Kong's economic recession, which began in the middle of last year, is deepening as the city -- a trading and financial centre -- is becoming increasingly vulnerable to the global economic downturn. Exports from Hong Kong fell 11.4 percent in December from a year earlier, their first double-digit drop in seven years. Analysts expect them to worsen in coming months now that the U.S. and European economies are in recession.

In January, deteriorating business conditions prompted Hong Kong firms to cut staff for a third straight month to protect margins, the PMI survey shows. Average staff costs, though, were flat.

Companies did benefit from lower costs, which fell for a fourth month running thanks mainly to sliding raw material prices and because they managed to negotiate discounts with suppliers. However, they also had to slash the prices of their products amid tight competition.

The PMI survey compares business conditions with a month earlier, based on data from Hong Kong companies across industries including manufacturing, services, retail and construction.