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Hong Kong economy

Hong Kong retail sector sees biggest monthly growth in over two years

But businesses hit by weak order figures for October from mainland China, declining at fastest pace since April

PUBLISHED : Friday, 03 November, 2017, 6:21pm
UPDATED : Friday, 03 November, 2017, 10:31pm

Hong Kong’s retail sector has posted its biggest monthly growth in 2½ years, rising 5.6 per cent year on year in September.

Retail sales grew for the seventh consecutive month amid stronger property and stock markets, and the rate at which the sector picked up was the fastest since February 2015, when sales surged by 14.8 per cent owing to Lunar New Year celebrations.

In the first nine months of the year, sales rose 0.9 per cent compared with the same period last year.

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Sales of jewellery, watches, clocks and valuable gifts outperformed all other categories, up 14.7 per cent year on year to HK$6 billion.

The Hong Kong Retail Management Association said the greater consumption was a reflection of growth in inbound tourist figures in September, which increased 4.8 per cent year on year as more mainland visitors visited the city.

“Apart from jewellery, good tourist figures also drove sales of medicines, cosmetics and Chinese drugs,” Thomas Cheng Wai-hung, the association’s chairman, said.

The Chinese Mid-Autumn Festival – widely celebrated in Hong Kong and often a catalyst for spending – fell in the first week of October, and Cheng said people had begun stocking up on mooncakes and festive items a month prior, contributing to food sales.

Looking ahead, the retail veteran predicted 3 to 4 per cent growth for next year.

“Consumer sentiment is always tied to the performance of the economy,” he said. “If the property and stock markets remain stable, then the retail sector looks certain to grow, as people are more willing to spend in buoyant times.”

The encouraging figures came despite the city’s private sector showing slowed growth in October.

The Nikkei Hong Kong Purchasing Managers’ Index dropped to 50.3 in October from 51.2 a month ago.

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The index gauges private sector business conditions, including manufacturing, services, retail and construction, by a monthly poll of executives from more than 300 private firms in Hong Kong.

A score of 50 or above signals growth in the economy, while anything below reflects contraction.

Businesses were hit by weak mainland orders, which declined at the fastest pace since April.

“Not only did companies struggle with weakening demand, they also grappled with rising business costs,” said Bernard Aw, principal economist at IHS Markit, which carried out the poll.

“Higher costs continued to put a squeeze on profit margins as corporations have limited room to raise selling prices amid lower sales.”

Based on the data, the firm’s researchers predicted growth of slightly below 4 per cent for the entire year.