Small spenders check growth and inflation

PUBLISHED : Tuesday, 08 November, 1994, 12:00am
UPDATED : Tuesday, 08 November, 1994, 12:00am

A SLOWDOWN in private consumption shackled both growth and inflation in Hong Kong's economy in the second quarter, according to figures released yesterday.

Preliminary real term estimates - those compared with the equivalent quarter last year - showed that gross domestic product increased 5.4 per cent in the second quarter, at the low end of economists' expectations.

That compared with the first-quarter rise of 5.7 per cent, unchanged after a November estimates revision. The updated estimates took the GDP growth in the first half to 5.5 per cent.

Meanwhile, the rise in the implicit price deflator of GDP - as a broad measure of overall inflation in the economy - eased to eight per cent in the second quarter from 8.9 per cent in the first quarter.

Standard Chartered Bank senior economist Mak Nak-keung attributed the economic slowdown to a dip in private consumption expenditure growth, which the official estimates put at 5.4 per cent for the second quarter against 10.6 per cent for the first quarter.

'Growth in consumption expenditure will continue to slow down, with retail sales growing only slowly,' he said.

'The [high] property prices, [low] pay rise, and the stock market situation do not encourage consumption.' Meanwhile, government consumption expenditure rose 4.2 per cent in real terms in the second quarter.

The official estimates also showed an improvement in exports.

On external trade in goods, exports grew 11.3 per cent in the second quarter. Within those, re-exports continued to provide the main impetus to growth, and registered a year-on-year growth of 15 per cent.

The decline in domestic exports narrowed to 2.3 per cent in the second quarter from 9.5 per cent in the first quarter, while imports rose 15.1 per cent in the second quarter.

Exports of services slowed to show a 4.8 per cent rise in the second quarter.

The figures were affected by a marked slowdown in the growth of tourism caused at least in part by a reduction in Taiwanese visitors passing through Hong Kong into China, according to the Government.

The growth rate for services imports was seven per cent.

Gross domestic fixed capital formation grew 11.3 per cent. Within this component, expenditure on construction showed a 15.1 per cent increase, mainly because of a further pick-up in private sector construction activity.

Expenditure on machinery and equipment recorded a growth of 10.5 per cent.