THE POWERS THAT BE have not yet officially pronounced a recession, but people on the street are already living with one. Ask just about anyone in Hong Kong about the impact of the economic slowdown and the response will be a quicker acceptance of the arrival of a recession than by economists. Analysts accept that two consecutive quarters of negative gross domestic product growth constitute a recession. In the past few weeks a number of Hong Kong's economic indicators have shown the economy is probably in the grips of its second recession in less three years. Exports are down, so are re-exports, while retail sales for September suffered a sharp year on year decline in value of 4.4 per cent. It indicates people have zipped tight their purses, even as the festive season looms large. With news of workers being laid off becoming a regular feature in newspapers, consumer confidence has taken a big hit - not helped by the events of September 11. Small entrepreneurs, such as seafood restaurateur and Cheung Chau holiday home proprietor Chu Sau-king, have been hit hard by the slowdown. Turnover at her restaurant and holiday house fell 30 per cent in the first 10 months of the year compared to last year. Ms Chu says she has to use her savings to sustain the business. 'Last year was a bad year already, but this year is even worse. Many people go to Shenzhen to have fun because there are many choices. It is much cheaper there too.' Although suffering losses, Ms Chu has not considered closing the businesses. 'Many Cheung Chau people live on these businesses. If it is closed, many people will lose their jobs. 'I have to save on my expenses and cut daily spending to keep the business running.' Apart from the service industry, many other sectors of the economy are suffering due to the economic downturn. Dentist Dr Lam (who does not wish to use his full name) used to earn more than HK$30,000 a month on average during the past three years. But since the economic malaise has set in he has seen his earnings fall by about HK$5,000 a month. 'Of course we are affected in times of recession . . . Bookings at the clinic have decreased 30 per cent during this downturn,' he said. Although the worsening economy so far has not had a particular impact on his lifestyle, Mr Lam says he is more cautious in spending on entertainment. 'I used to spend HK$4,000 to HK$6,000 a month for entertainment - such as dining out or going on boat trips. But now I have cut the budget to about HK$2,000,' he said. The general trend among people in Hong Kong is to trim back on leisure and entertainment as a way to cope with the downturn. Laundry worker Poon King-shun, 64, who earns HK$10,000 a month, has also cut his spending on eating out and drinking with friends. 'I am much more cautious when spending money. I consider carefully whenever I need to spend money. I seldom dine out now,' he said. Mr Poon used to spend between HK$2,000 and HK$3,000 eating out or on a drinking session with friends, but of late that expense has been cut by a third. Being a mobile phone lover, he used to change his handset whenever a new model was introduced. But for the past two years he has stuck with the same model. 'I used to change my mobile phone every year. But now I won't. It's not necessary to buy a new one so often. A mobile phone is not a necessity,' he said. Even though Mr Poon has a relatively stable job, his two sons have been unable to escape the economic downturn and have suffered pay cuts. Previously, each son contributed HK$5,000 a month towards household expenses, but because of their cuts in pay they have been unable to maintain the level of their contributions. Mr Poon, who used to spend his whole salary, now has to contribute towards the household expenses. 'Their incomes are not as stable. As parents, we have to consider their situation,' he said. Instead of choosing different forms of investment, Mr Poon prefers to keep his money in the bank. He says he wants to save more for his retirement. 'In the past, I spent whenever I liked because I thought I could count on my sons to support me when I was old. 'But, with the recession, their jobs are not stable and they have their own worries . . . I have to save a bit for my retirement. You know as a Chinese, I do not want to count on public assistance in the future.' It is different for Munish Malik, head of Asia-Pacific corporate communications at Hewitt Associates. As with many other professionals, Mr Malik said the gloomy economic environment would not deter him from investing his money on equities and bonds. 'I don't think there is any impact there [on investment]. It won't deter me from investing,' he said. But, following the pattern of most people during the present uncertain economic climate, Mr Malik tries to be more cautious about spending on something extra, which could be done later. 'In times of recession, I think it makes sense not to spend that much and save for the rainy days,' he said. But, in every situation, there are always exceptions, whether economic downturn or boom times. Song writer and electronic music technologist Chan Pui-ching is an exception. He spends a lot more on computers and music equipment when the prices are low, as they are at present. In the past nine months Mr Chan has spent more than HK$60,000 on computers and electronic equipment. This is more than he would normally think of spending. Last month he bought a digital camera costing more than HK$10,000. Apart from that, he owns a car which costs him another couple of thousand dollars each month. 'In the past, these things were very expensive and I didn't even think of buying them, although they are useful for my work,' Mr Chan said. 'But now the prices have gone down and I think I can afford them. It's an investment for my career.' Obviously, money is not the main worry for Mr Chan, and neither is job security a concern. But there is a trade-off - Mr Chan scarcely saves any money, but he has to be more cautious when spending on other things such as CDs because of his 'huge' expenditure. 'I am not worried about my retirement. I am presently in two insurance plans, which serve as back-ups for any just-in-case needs,' he said. 'I don't think I will retire by the age of 65. I think I will keep on working while my health permits.' Even though Mr Chan is not much affected by the recession, he says the economic situation depresses him. Some of his friends have been laid off or forced to accept pay cuts. 'People always talk about value-added but at the same time I see the value of human beings depreciated. People's living standards are getting worse. I think it's very sad,' he said. Mr Malik holds a different point of view. He said management had to meet the challenges of running a business with less resources in the time of recession. In such a situation, some employees may have to face a salary freeze or maybe even a salary reduction. 'In terms of the personal situation, there is more recognition of what an employee does at work . . . Compensation is more performance oriented, or performance related,' he said.