The business conditions of Hong Kong's private sector continued to improve last month with the HSBC Purchasing Managers' Index (PMI) registering 51.7 in December, HSBC's survey on purchasing managers showed Friday.

A reading above 50 indicates expansion, otherwise signals contraction.[Hong Kong Company Formation, Incorporation, Business Registration]

Although the latest HSBC Hong Kong PMI fell slightly from the reading of 52.2 in November, it remains above the point of expansion, thanks to a modest rise in output and new orders, according to the bank.

The output sub-index rose to 53.7 in December, expanding at its fastest pace since February, the index showed.

New orders, the sub-index that tracks overall new business the city received, also continued the upward trend, recording 52.9 in December, and expanding for the second straight month.

Although the renewed contraction in new orders received from the mainland was noticed last month as the sub-index fell to 48.1 in December, down from 52.0 a month earlier, HSBC said respondents widely cited "improved economic conditions" in the survey, suggesting that demand at home and from abroad is "generating more than enough of a counterbalance".

The softening of new business inflows from the mainland is a concern, but can be partly attributed to a lull in post-Christmas orders, said Donna Kwok, HSBC's Greater China economist.[Hong Kong Company Formation|Hong Kong Company Registration]

He added that Hong Kong's economy looks set to strengthen through year-end with healthy local job market conditions still underpinning domestic demand.

The PMI also noted that employment in the private sector rose for the third consecutive month in December as firms hired more staff to meet greater output requirements.

Input price inflation remains strong, despite easing slightly since November. Firms will manage to pass these excessive costs on to clients, the index indicated.

For the fourth quarter as a whole, the PMI reading averaged 51.5 - up from 50.2 in the third quarter, which was the highest quarterly reading since the first quarter of 2012, according to the bank.

"With the fourth quarter's average PMI notably stronger than the previous quarter's average, and retail sales growth holding firm, we should see further improvement in the next GDP release," Kwok said.

The University of Hong Kong projected on Thursday that the city's GDP growth would accelerate by up to 4.3 percent this year, from an estimated 1.3-percent growth in 2012, due to the recovery in external demand.[Hong Kong Company Registration Guide]

The International Monetary Fund's latest forecast in December also expected the Hong Kong economy to pick up to around 3 percent in 2013 as the drag from exports abates, after the Hong Kong government in November cut its 2012 GDP growth forecast further to 1.2 percent as economic expansion remained subdued in the third quarter.