Retail sales in Hong Kong grow for first time in two years on upbeat demand, visitor figures

Industry expects eye recovery but noted March growth due to short-term factors

PUBLISHED : Friday, 05 May, 2017, 5:41pm
UPDATED : Friday, 05 May, 2017, 10:56pm

Retail sales in Hong Kong grew in March for the first time in about two years at 3.1 per cent, with a recovery on the horizon, according to industry experts.

The expansion, the first since February 2015, came in the same month as an uptick in tourism figures, with visitor arrival numbers surging 8.8 per cent, the biggest growth in more than two years.

“The March sales are encouraging. We are very close to the end of the tunnel,” said Thomson Cheng Wai-hung, chairman of the Retail Management Association. The rise ended 24 months of decline in retail figures.

“[The March growth] reflected partly the continued recovery of visitor arrivals and partly the robust local consumption demand underpinned by favourable job and income conditions,” a government spokesman said in a statement.

But Cheng said the expansion was largely due to short-term factors, and he would need to see if the recovery was sustainable.

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He noted that China’s worsening ­relations with South Korea had brought more mainland travellers to the city, while local consumers did not travel overseas in March – like they did last year – as the Easter holidays fell in April this year.

He expected full-year sales to drop by 2 to 3 per cent, compared with the 8.1 per cent slump last year.

Nevertheless, local retailers are more positive than before.

Most of the association’s members reported better sales in April and during the mainland’s Labour Day holiday earlier this week, Cheng said, prompting them to abandon their previous strategy of offering steep discounts in order to boost sales.

Spending on jewellery, watches and other luxury items – ­items usually popular with mainland visitors – grew the most in value, jumping 8.4 per cent in March.

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Meanwhile, sales of motor vehicles also rose 16 per cent in the month, as buyers rushed to purchase electronic cars before the removal of a government tax waiver on April 1. Sales of apparel and commodities in supermarkets grew 2.5 per cent and 2.6 per cent respectively.

At the same time, Hong Kong’s private sector grew at its fastest rate in more than three years last month, thanks to increased global demand for products and services, and despite headwinds from the mainland.

The Nikkei Hong Kong Purchasing Managers’ Index, which gauges business conditions in the manufacturing, services, retail, construction and other sectors, rose to 51.1 last month, up from 49.9 in March.

A reading below 50 on the index indicates a contraction, while one above 50 shows growth.

The gain last month came after consecutive declines from January to March. The last time Hong Kong registered a higher index reading was in early 2014.

The expansion was largely driven by increased output and new orders, which helped fuel higher volumes of new business for the first time in more than two years, according to the survey.

It also came despite weaker demand from the mainland, which is Hong Kong’s biggest trading partner.

“Hong Kong’s private sector started the second quarter in expansionary territory, which was a marked improvement compared with the recent trend,” said Bernard Aw, economist at IHS Markit, which compiles the survey.