Hong Kong’s retail sales will drop 5 per cent this year amid fall in numbers of mainland Chinese tourists, says PwC
- The accounting giant’s estimate of a 5 per cent fall in retail sales is a downgrade from its earlier forecast of a 3 per cent drop
- Government statistics showed first quarter retail sales fell 2 per cent from the same period last year
Hong Kong’s retail sales are expected to slump 5 per cent to HK$460 billion (US$59 billion) for the full year, dragged down by economic uncertainty and a decline in mainland Chinese tourists, according to international advisory firm PriceWaterCoopers (PwC).
The estimate is a downgrade from its earlier forecast of a 3 per cent drop in sales, reflecting a weaker outlook, as government statistics showed first-quarter retail sales falling 2 per cent compared to the same period last year.
“The ongoing Sino-US trade dispute, equity market turbulence and volatility of renminbi continue to cast a long shadow on consumers’ sentiment and actual spending,” said Michael Cheng, PwC’s Asia-Pacific consumer markets leader.
Retail sales are often used as an indicator for the performance of an economy. Government data in the previous month have already revealed sluggish economic growth as the US-China trade war continues to affect consumer spending.
Electrical and luxury goods experienced the biggest decline in sales and are expected to shrink even further, PwC said.
“The recent political and social unrest, temporary closure of the Peak Tram due to renovations, coupled with a lack of new tourist attractions might lower mainland tourists’ appetite to visit Hong Kong in the short term,” said Cheng.
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The number of mainland Chinese visitors to Hong Kong has fallen for three months in a row since February – a concern for retailers, as they make up roughly 80 per cent of all arrivals in the city.
Visitor numbers hit record highs after the Guangzhou-Shenzhen-Hong Kong Express Rail Link opened in September last year followed by the Hong Kong-Zhuhai-Macau bridge in October, linking the city to the mainland. In total, 51 million mainland Chinese tourists arrived in Hong Kong last year.
Consumer goods like health and beauty products, however, are expected to hold up against global headwinds, said PwC, which expects “modest growth” from the sector.
The popularity of cosmetics and personal care products is part of a global consumption trend, said Kevin Lam, executive director and head of retail services at Cushman & Wakefield. “People care more about [grooming], in terms of healthcare and skincare.”
And these items, at prices much lower than electrical and luxury goods, stand to benefit from the influx of mainland Chinese visitors who arrive and leave the city on the same day, Lam said in an earlier interview last week.
Though their numbers may not be at January highs, there were 11.8 million same-day visitors from mainland China in the first quarter of this year, making up more than half of the total number of Chinese visitors in the same period, according to the immigration department.
