Hong Kong retail boss highlights fears over deflation as shops discount their prices
The worry comes as shops discount their products to attract custom or clear stocks
The retail sector has raised concerns over deflation now that many consumer goods are being discounted to win back customers.
Caroline Mak Sui-king, chairwoman of the Hong Kong Retail Management Association, said yesterday a growing number of apparel and footwear retailers needed to slash prices to clear inventories.
The value of the clothing and footwear sector's total sales dropped 2.8 per cent year on year to HK$5.16 billion last month, while volume rebounded 2.1 per cent over the same period, according to government figures.
Mak pointed out that the electrical goods sector was also facing pressure. It recorded a 14 per cent increase in sales value last month, while volume surged nearly 36 per cent.
She expressed concern that there could be more widespread price cuts in the city, saying it could herald deflation.
Retail stores like furniture chain Ikea have started sales ahead of the summer season.
Mak questioned whether such moves could revive consumer sentiment and boost the performance of the overall retail market for the rest of the year.
Sluggish growth in mainland tourist arrivals, which had long been the sector's key growth driver, coupled with weak domestic demand would continue to weigh on sales, she said.
A possible interest rate rise in the US, which would further strengthen the US and Hong Kong dollars, was also likely to dampen tourist spending. "The strong Hong Kong dollar will drive more people to travel to neighbouring destinations," she predicted.
Mak said that retailers, facing an increasingly challenging business environment, were now more cautious about expanding their operations.
The total value of Hong Kong's retail sales last month, provisionally estimated at HK$39 billion, was down 0.1 per cent compared with the same month last year. It was the third monthly decline in a row.