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Near-term sales figures will depend on tourism outlook and consumer sentiment about the flagging economy. Photo: Felix Wong

Worst drop since 1999: Hong Kong retail sales figures for first half of year suffer slump

Despite the disappointing results, the government says there was an improvement in the second quarter compared with the first

Hong Kong’s retail sales plunged 10.5 per cent in the first half of this year – the worst drop in 17 years – dragged down by the persistent tourism and economic downturn.

But the rest of year could see a slight pick-up in retail numbers, as the lower base last year would make growth easier, according to Mariana Kou, senior analyst at investment house CLSA. She forecast a 5 to 7 per cent decline for the whole of 2016.

In June, retail sales declined 8.9 per cent year on year, the 16th consecutive monthly contraction, while there was a dip of 8.4 per cent in May. During the Asian financial crisis in 1999, retail sales dropped 10.9 per cent in the first six months of the year.

“At least the situation is not getting worse,” Kou said, adding that the June figure was roughly in line with analysts’ predictions of an 8.1 per cent decline.

Kou said the city’s once-booming retail sector showed signs of stabilising, but lay-offs and store closures could continue in the second half of the year.

However, she noted that slight growth could be observed as early as August this year purely due to the lower base effect. “It would not be genuine growth,” she said.

The June decline was led by jewellery, watches and other luxury items – usually popular with mainland visitors – which plunged 20.4 per cent in sales.

This was followed by department store goods and clothing, which declined 10.5 per cent and 0.6 per cent respectively in June. Retail sales in electrical goods and photographic equipment suffered a 25.7 per cent dip.

Supermarket sales did better, with a rise of 1.9 per cent, followed by sales of medicines and cosmetics, which increased by 5 per cent, and the category of food, alcoholic drinks and tobacco, which rose 2.9 per cent.

“Most of the member companies anticipate the downward trend to continue but slow down in the remaining year of 2016, taking into account a lower base recorded in the second half of 2015,” the Hong Kong Retail Management Association said.

A government spokesman noted that despite the drop in year-on-year figures, retail sales improved moderately in the second quarter compared with the first quarter of this year.

“Looking ahead, the near-term retail sales performance will still depend on the performance of inbound tourism, as well as the extent to which consumer sentiment will be affected by uncertainties about the economic outlook,” he said.

At the same time, the city saw a pick-up in July visitor numbers. Overall arrivals increased 5.3 per cent over the same period last year, according to Secretary for Commerce and Economic Development Greg So Kam-leung.

He said mounting safety concerns in popular tourist destinations such as Europe and Japan, as well as appreciation of currencies in nearby regions, had helped Hong Kong gain some tourists this month.

This article appeared in the South China Morning Post print edition as: Worst drop in HK retail sales since 1999
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