Knock-on from US-China trade war causes slowest growth in 18 months for Hong Kong retail sales
- Retail sales rose 6 per cent in October but growth fell to 1.4 per cent the following month
- Hong Kong Retail Management Association says demand for luxury goods will remain weak as uncertainty surrounding the trade war prevails
Hong Kong retail sales grew 1.4 per cent in November – the slowest rate in 18 months – in the shadow of the US-China trade war and volatile stock markets.
The government said on Thursday that the year-on-year performance in November, at HK$39.2 billion, tapered off abruptly from a revised rise of 6 per cent in October, marking the weakest growth since June 2017.
The sharp slowdown happened before China and the United States agreed a 90-day truce since December 1 for cutting a deal in ceasing punitive tariffs imposed on each other.
In the first 11 months of 2018, retail sales jumped 9.7 per cent.
Shanghai Commercial Bank head of research Ryan Lam said the November figure slowed down more than he expected, which was about 4 per cent growth.
“Purchasing power is waning sharply,” he said. “The poor stock and property markets have caused consumers’ wealth effect to diminish, which is eating away at their purchasing power in the final months of 2018.”
He added that he expected the trend of weakened wealth effect to spill over into the first half of 2019.
In November, the Hang Seng benchmark index and the US’s Dow Jones Industrial Average index were drifting in see-saw trading though ending the month with 4.28 per cent and 0.62 per cent gains respectively. Hong Kong’s property transactions have slowed down since last summer.
In November, bigger-ticket items such as jewellery, watches, clocks, valuable gifts did badly with a 3.9 per cent decline. Cosmetics and medicines fared much better with a 10.1 per cent rise while new Apple iPhone models helped fuel consumer goods not elsewhere classified, a 14.3 per cent jump.
Annie Tse Yau On-yee, chairwoman of the Hong Kong Retail Management Association, said demand for luxury goods would remain weak as uncertainty surrounding the trade war prevails.
“Who knows if China and the US will reach a deal and what the deal will be,” she said, adding that retail sales would at best grow at “a low single-digit rate” in 2019.
November sales appeared not to benefit much from the 20.6 per cent leap in tourist arrivals to 5.99 million in the month, of which about 80 per cent came from mainland China.
Most of the mainland visitors came to Hong Kong via the newly built Hong Kong-Zhuhai-Macau Bridge and the Guangzhou-Shenzhen-Hong Kong Express Rail Link.
“The number of visitors who stayed overnight in November was up by about 6 per cent, which means limited growth in retail sales,” Tse said. “Retailers need more visitors to stay longer in the city so that they will spend more.”
Meanwhile, the University of Hong Kong said the city would feel more of an impact from the trade war and potential interest rate rises in 2019.
The university’s Institute of Economics and Business Strategy estimated the city’s economy grew at 3.4 per cent in 2018 and forecast year-on-year growth of at 2.3 per cent in the first quarter of 2019.