Hong Kong's gross national product for the third quarter of this year was HK$329.5 billion, an increase of 0.9 per cent over the same period last year, according to government estimates. Total factor income inflow grew at a slightly slower pace than total outflows in the same period for the first time this year, narrowing the inflow of external factor income to HK$2.9 billion in the third quarter compared with HK$9.7 billion in the same quarter last year. In real terms, after netting out the effects of inflation, GNP rose by 8.1 per cent. Total factor income inflow rose by 10.2 per cent to HK$101.6 billion over the same period last year while total outflow increased 19.6 per cent to HK$98.7 billion. The two figures were equivalent to 31.1 per cent and 30.2 per cent of gross domestic product in that quarter. The main destination for external factor income outflow in the third quarter this year was the mainland, accounting for 15.5 per cent. GNP is closely related to GDP as a measure of economic performance. While GDP values the total product of economic activity within Hong Kong's borders, GNP measures the total value of the product of all Hong Kong residents, even if their economic activities were conducted elsewhere in the world. Total factor income is the economic measure, denoted in monetary terms, by which goods and services are valued. Economists said these figures indicated Hong Kong's economy was recovering at a slower pace than generally thought. Hong Kong General Chamber of Commerce chief economist Ian Perkin said: 'I think it's telling us that the economic recovery is not as strong as the nominal GDP figures would show. 'We have an economy that's split. 'On the one hand, external factors, such as our re-exports of mainland goods, is still strong; yet, on the other hand, we still have to be cautious about the deflationary pressures on the economy.' While the deflationary pressures on Hong Kong assets seem positive for consumers, the adverse affect on corporate cashflows could eventually have a backlash on the economy as a whole. 'Right now the deflation in Hong Kong is mostly driven by rents and retail price cuts. This has been easing over the past several months, but obviously the GNP figures would show that it hasn't eased a lot,' Mr Perkin said.