'Grim' retail sales index tells only fraction of story
The grim performance of Hong Kong's retail sales continued in June, producing the worst first-half showing since 2009.
SCMP, August 1
And this was the top story on the front page on Friday, which means that the boss must have thought it the most important news of the day (there were no corruption arrests in China the previous evening, I think).
I shall now do my best to make it a less important item of news. This is an easy task, really. It requires the revelation of only one fact. The retail sales survey that goes into making up the retail sales index covers only 31 per cent of retail sales in Hong Kong.
That's right, fewer than one-third of total retail sales. It used to be fewer than one-quarter but then we had the shopping boom by mainland tourists, which redoubled in intensity in 2010. Mainland shoppers buy the sorts of things that show up in the retail sales survey.
What types of things are these?
Thing-type things, that's what they are - tangibles, consumer durables and non-durables, jewellery and junk, the sorts of purchases that make you say, "We could never move to a smaller flat cuz where would we put all of our stuff?"
But then here is another of Jake's Patented Astonishing Facts for you.
Most of what we buy (mainland tourists excepted, of course) isn't stuff. Most of what we buy is services - haircuts, doctors' consultations, education, cinema, concerts, and the list goes on and on.
These purchases account for about 52 per cent of total consumer spending, and the interesting fact is that none of them show up in the retail sales report. They just don't exist when this tally is done.
Also eliminated from existence are any purchases you make online. The retail sales report simply ignores them. The internet never happened. Amazon, PayPal, eBay, they just don't exist.
The only place that they do exist in our official statistics is in the personal consumption expenditure segment of our quarterly gross-domestic-product report. You'll see true facts of retail sales there again this month when the second-quarter GDP figures are published.
Why do we continue to publish this defective retail sales index?
I have asked the Census and Statistics people and they just say what they repeat in their news release every month - "These retail sales statistics are primarily intended to measure the sales receipts in respect of goods sold by local retail establishments, for gauging the short-term business performance of the local retail sector."
This just evades the question, of course. Let me rephrase the answer - "Someone in authority pushed the Go button and now we can't stop unless someone in authority pushes the Stop button and you're not someone in authority."
But let's cut to the chase. The chart gives you an indication of how much all of this might affect consumer activity. The blue line represents the growth of the retail sales index, the red line the growth of total domestic-market spending.
For the red line I only have data up to March, but the trend seems pretty obvious. Yes, it is slowing down but unlikely to be negative. It did not go over the top in 2010, it is unlikely to go through the bottom this year. There is no need to push a panic button.
And one big reason that the retail sales index is down so much is that retailers of stuff just haven't been able to drive up their prices for the last two years. The market resists, the mainland tourists cannot be pushed.
Oh, I cry such enormous, huge tears.