Second-quarter figure of 5.2pc shows a sharp decline Second-quarter economic growth eased to a lower-than-expected 5.2 per cent, the slowest pace since 2003, although the government is still forecasting roughly 5 per cent growth for the full year. The result, which took many economists by surprise, is a sharp decline from the 8 per cent recorded in the first quarter. The second-quarter consensus estimate was 6.5 per cent. Government economist Kwok Kwok-chuen said 'the economic growth rate is now settling down to a more sustainable pace' following robust expansion over the past 30 to 36 months after the Sars outbreak in early 2003. 'Even if there is going to be some slowdown in economies, particularly for the US, such a slowdown is expected to reduce the inflation and interest rate risks, so we remain generally cautiously optimistic for the second half of this year,' Mr Kwok said. Consumer prices rose by 2.3 per cent last month against a year ago, higher than June's 2.2 per cent. The rise in inflation was largely due to higher package tour fares. The official forecast remains at between 4 per cent and 5 per cent with the government expecting the final result to be closer to 5 per cent, more in line with the long-term trend growth rate of 3.9 per cent. As the first half recorded 6.6 per cent growth, this implies a second half of only 3 per cent to 4 per cent, although Mr Kwok declined to estimate the economic performance for the rest of this year. Hong Kong General Chamber of Commerce chief economist David O'Rear is sticking to his 6.5 per cent projection for full-year growth and believes the government estimate is too conservative. He said much would depend on how well the US economy performed as this would affect Hong Kong's exports. Census and Statistics Department figures indicate that second-quarter results were mainly dragged down by slower growth in the exports of goods, down to 6.4 per cent from 14.4 per cent in the previous quarter. Investment in building and construction improved, but stayed in negative territory at minus 6.4 per cent, an improvement on minus 11.1 per cent. However, HSBC economist George Leung Siu-kay expects growth in domestic consumption to gather momentum later this year given the pause in interest rate rises, and the active labour market. Private spending rose by 5 per cent in the second quarter, exceeding the 4.5 per cent recorded in the first quarter. Two weeks ago, the Federal Reserve decided to leave US interest rates unchanged at 5.25 per cent after 17 consecutive increases in the past two years. 'Our full-year forecast of 6.4 per cent is on the high side but I don't think there are any worries for a downgrade,' Mr Leung said. Hang Seng Bank economist Vincent Kwan Wing-shing is also confident full-year growth will exceed the government projection. 'Exports are the big swing factor but, if third and fourth quarter growth in trade can be sustained at close to 10 per cent, the GDP result will be better,' Mr Kwan said.