Government maintains full-year forecast but expects fourth-quarter slowdown The economy is likely to expand by 4 to 5 per cent in the fourth quarter over a year earlier following strong growth of 7.2 per cent in the third quarter, the government economist said yesterday. Kwok Kwok-chuen said the government was sticking to its 7.5 per cent target for full-year growth, the same as the revised forecast released in August. 'The economic outlook for the fourth quarter is pretty good but a slowdown in growth is inevitable,' he said. 'Hong Kong's economy is subject to external influences and the fast pace of growth around the world is unsustainable.' Mr Kwok said the expected fourth-quarter growth was still quite fast for a mature economy such as Hong Kong. The 7.2 per cent expansion seen in the third quarter - the fifth consecutive quarter of economic growth - was still remarkable even though it was lower than the 12.1 per cent year-on-year leap recorded in the second quarter, he said. Mr Kwok said the second-quarter growth was partly inflated by the exceptionally low base of comparison caused by Sars last year. The upturn, however, extended well into the third quarter, thanks to notable growth in exports and consumer spending. Exports of goods surged 15.3 per cent in the third quarter over the same period a year ago, while exports of services rose 10.3 per cent. Consumer spending grew 5.1 per cent year on year in the third quarter, after rising 11.2 per cent in the second quarter. 'Local consumer spending held firm as employment conditions improved and sentiment remained generally positive,' Mr Kwok said. Investment in machinery, equipment and computer software rose 12.2 per cent in the third quarter. The increase coincided with the implementation of the cross-border Closer Economic Partnership Arrangement and it was 'worth exploring' whether there was a relationship, he said. However, investment in construction fell 8.4 per cent compared with the corresponding period last year, following a 10.1 per cent drop in the second quarter. The government economist said the setback was the result of the completion of a number of private sector projects in the earlier months and a further fall-off in public housing construction following the scrapping of the subsidised Home Ownership Scheme. The consumer price index rose by an average of 0.8 per cent in the third quarter over a year earlier, reversing the 0.9 per cent decline in the second quarter. 'The pace of upturn in the CPI is still being held back by the earlier fall-off in housing rentals and we forecast the index will fall by 0.3 per cent for the whole year, down marginally from the forecast of zero change released in August,' Mr Kwok said. He said Hong Kong was expected to face greater inflationary pressure as a result of the plunging value of the US dollar. But the weaker greenback would also enhance the competitiveness of Hong Kong's exports and help attract international investment. The property market regained momentum towards the end of the third quarter, Mr Kwok said. By September, flat prices had risen by about 6 per cent over June, resulting in a cumulative rebound of around 36 per cent from the middle of last year.