Economic Update


Turning around? More like deteriorating at a slower pace

While Hong Kong’s economic activities remained downbeat in the second quarter, the year-on-year declines in some high frequency data points, including those of trade, retail sales, and visitor arrivals, moderated.

Imports and exports contracted 0.9% YoY and 1% YoY respectively in June (see Chart 1). On a three month aggregate basis, imports dropped 3.2% YoY in the second quarter (vs. -8.2% in 1Q2016); exports declined by 1.1% during the same period (vs. -6.8% in 1Q2016). The moderation of declines does not suggest an end of external uncertainties. In fact, the favourable effects of a lower comparable base from the previous year are providing a buffer for the indicators.

The same could be said for retail sales and visitor arrivals (see Chart 2). Triggered by the replacement of the Individual Visit Scheme with the Individual Visit Endorsements in April 2015 and lingering external uncertainties, visitor arrivals appeared to develop a negative growth trend starting in June 2015. Largely due to the lower base effect, visitor arrivals declined by “only” 1.7% YoY in June, ironically the “best” performance since May 2015, when the city saw a 3.6% YoY increase in incoming visitors. In the second quarter, overall visitor arrivals dropped 3.5% YoY (vs. -10.9% in 1Q2016), while retail sales declined by 8.3% in the second quarter (vs. -12.5% in 1Q2016).

Despite the “improvements”, it would be over-generalising if we suggest the worst is behind us, as weak sentiments linger. With the results of the Business Tendency Survey staying in negative territory for the third consecutive quarter – the longest such streak since data became available in 2008 – and the Consumer Confidence Index dropping 11.2% YoY, Hong Kong’s economic outlook remains cloudy.

The Census and Statistics Department will be releasing additional data – including 2Q GDP and detailed statistics of external merchandise trades – next week, and a more detailed analysis on the economy will be available in the next issue of the Bulletin.


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