The Chamber's Chief Economist, Ian K Perkin, comments on the release of the SAR's retail sales figures for September.

Faced with a slowing economy and a loss of consumer confidence in the wake of the terrorist attacks on the United States, Hong Kong retail sales took a beating in September.

At $14.4 billion for the month, total retail sales value was the worst since February this year when the sector was suffering from its usual post-Lunar New Year lethargy.

It was also the worst September figure since 1999 when the local economy had yet to emerge from the last recession brought on by the East Asian financial crisis of 1997-1998.

The outcome for the month was also well below my own forecast of $14.7 billion.

Compared with last year, the official September figure was down 4.4 per cent in value terms and 1.7 per cent in volume terms, indicating just how dramatic the decline was during the month.

Chief culprit in the decline would have been the "shock effect' of the terrorist attacks on New York and Washington, with consumers closing their purses as they reacted to the enormity of the events and their likely aftermath.

Other factors, however, would have been the already slowing Hong Kong economy, the collapse of the share market immediately after the US attacks, the decline in visitor arrivals and stagnant incomes. The continuing lacklustre property market would also have had an impact.

These factors are not likely to be reversed in the short term and may be exacerbated by the uncertainties affecting the global economy – and therefore the local economy – due to the continuing anti-terrorism campaign world-wide.

One positive for sales is lower interest rates, with the US Federal Reserve expected to lower rates again overnight and the local Hong Kong banks expected to follow.

Looking immediately ahead, there should be a modest pick-up in retail sales over the traditional spending period of Christmas, calendar New Year and Lunar New Year, but beyond that there is likely to be continued pressure on the retail sector.

This will continue until there is evidence of a sustainable turnaround in the local economy, local consumer sentiment and another pick-up in visitor arrivals in the Hong Kong SAR.

For further information, contact: Ian K Perkin, Chief Economist, 2823-1242