26 August 2002

EXTERNAL TRADE NUMBERS BOOST HOPES OF SECOND HALF RECOVERY
July figures were significantly better than market expectations

Hong Kong’s merchandise trade figures for July, out today, have raised hopes of an externally driven improvement in the local economy in the closing six months of the year, despite a relatively lacklustre trade and economic performance in the first half.

The July trade figures, revealing a 9.8 per cent growth in exports of goods for the month and a 7.3 per cent increase in imports, were far better than expected by most analysts, despite the improvement evident in the June numbers.

This is because June numbers were regarded as something of an aberration by analysts because it was recognised they were coming off a low base last year.

The continued growth in July, however, is an entirely different matter as the growth for the month is off a similar good performance in the same month a year ago.

If this sort of pace of growth can be continued for the second half as a whole, it raises the prospect of an export-led recovery in the overall economic numbers, despite the generally weak performance of the SAR’s domestic economy.

Hong Kong has the Mainland to thank for the improvement, with China’s export numbers picking up substantially in recent months and spilling over into re-exports through the SAR. Re-exports in July were up 12.1 per cent, while domestic exports were down 9.1 per cent.

It is still too early to suggest that this pace of growth can continue, but the signs are at least a lot more promising for external trade growth than they were at the beginning of the current calendar year.

In the meantime, the second quarter Gross Domestic Product (GDP) numbers, to be issued by the Government on Friday, will give an indication of whether the modest recovery in external trade in the three months to June had any overall impact on growth in that quarter.

Certainly, there may have been enough external impetus to push the SAR into positive growth territory (perhaps by about 1 per cent) after three months of decline.

A positive outcome for the quarter would follow a revised 0.5 per cent decline in the first quarter of this year, a negative 0.9 per cent in the final quarter of 2001 and a negative 0.3 per cent in the third quarter of 2001.

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