The recent set of data released by the Census and Statistics Department showed that both the employment market and inflation have remained stable.
Labour market remains tight
The data showed that Hong Kong’s employment market remains tight, with unemployment rate dipping 0.1 percentage point to 3.3% from the previous reading, reaching the recent low seen in February (see Chart 1).
As a whole, the moderation of unemployment is mainly attributable to the decline in the construction (from 3.2% to 3.1%) and the finance, insurance and real estate (from 2.7% to 2.6%) sectors, implying that these sectors are likely experiencing stabilisation of business performance. On the other hand, the unemployment rate of the tourism-related sectors (i.e. retail, accommodation and food services) remained unchanged at 5.2%, which indicates that the relevant businesses continue cautious in hiring amid a clouded outlook.[1]
Inflation to remain contained
In November, inflation remained flat at 1.2%, unchanged compared to October (see Chart 2).
Source: CEIC Data, HKGCC economic analysis
During the first 11 months of 2016, the Composite CPI rose by 2.5% YoY. Looking into its different components, prices related to housing marked the highest surge (+4% YoY) during the period despite the recent moderation in increases, followed by food-related expenses (+3.4%). On the other hand, decreases in consumer prices related to durable goods (-5.4%) and clothing and footwear (-3.4%) were the most significant, reflecting the lacklustre consumer sentiment.
Conclusion
Despite the acceleration of upward price pressure driven by food coming from the Mainland, our main source of food imports, the strong Hong Kong Dollar will help us tame the pressure of imported inflation. Given that wage growth is expected to be moderate in 2017 (15 December Economic Update), inflation remaining at low levels should be viewed as supportive to the economy.
Referring to data prepared by the Labour Department, labour market conditions have remained tight – if not tighter than previous years – and employers continued to face difficulties in filling some of the vacancies (see Table 1). Notwithstanding the unmatched demand for labour, full employment should remain intact and such conditions will continue to support the local economy.
Table 1. Job Seeking-Vacancy Dynamics Showed That Labour Market Remained Tight
Sales
Security Guard
General Office Clerk
Vacancy (V)
Seekers (S)
S-V ratio
Nov 2016
10,312
1,902
18.4%
5,114
597
11.7%
2,826
1,772
62.7%
Nov 2015
10,943
2,150
19.6%
5,808
561
9.7%
3,075
1,936
63.0%
Nov 2014
10,377
2,437
23.5%
5,456
654
12.0%
2,849
2,143
75.2%
There are also potential downside risks associated with the labour market, with the inbound tourism weaknesses being one of the top worries (17 October Economic Update). Noting that there is a seasonal trend with the Hong Kong labour market in which layoffs and dismissals tend to happen during the first half of the year (see Chart 3), Hong Kong’s economic outlook is still shadowed by uncertainties.
[1] Unemployment rate of these sectors was at 4.5% in November of both 2014 and 2015.
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