Prudent Hong Kong shoppers drive 2.9pc retail sales slump for March
Surprise drop in domestic consumption blamed for overall decline of 2.9pc in March
Hong Kong's retail sales for March dropped by 2.9 per cent year on year to an estimated HK$38.4 billion, worse than market predictions, due to weaker-than-expected local buying.
The decrease, announced yesterday by the Census and Statistics Department, was a disappointment to economists, who expected an increase of 4 to 5 per cent from the same period last year.
As tourist arrivals went down 8.7 per cent in March from the same month a year ago, it was anticipated that the luxury sector would remain sluggish. This was confirmed by yesterday's figures showing an 18.6 per cent drop in sales of jewellery, watches and valuable gifts for the month.
What surprised economists was how much local shoppers had tightened their purse strings.
Sales in supermarkets dipped 0.7 per cent for the month, compared to a year-on-year increase of 3.7 per cent for January and February combined.
The increase in sales of food, alcohol and tobacco also narrowed to 4 per cent in March from 15.3 per cent in the first two months of this year.
"Those two categories are not driven by tourist spending. They show a slowdown in consumption by local shoppers," said Ryan Lam, senior economist at Hang Seng Bank.
Uncertainties over US interest rates and announcements about a slowdown in the mainland economy could have weakened consumer sentiment, Lam said. However, he expected the situation would improve in the second half of this year as the Hong Kong dollar weakened from its peak in March, and as the central government rolled out more policies to stimulate the economy.
Raymond Yeung, a senior economist with ANZ, said the drop in March retail sales was largely due to lower prices.
He expected the drop to continue for last month and this as locals went overseas during holidays. "Hong Kong retailers are competing with shops overseas as well as websites offering online shopping," he said.
Brokerage CLSA also expected sales for last month to be weak. "Our channel checks indicated major declines of 10 to 30 per cent in the high-end segment over the Easter holidays, while the new visa tightening on Shenzhen residents may impact parallel trading activities and mid-market retailers," it noted, referring to a decision to restrict Shenzhen residents to one cross-border visit per week.
In the hospitality sector, Hong Kong Hotels Association chairman Victor Chan said room rates continued to be under pressure.