EXTERNAL TRADE: Robust 2006 performance
 External trade showed robust performance in the fourth quarter of 2006, both in goods and services. Total exports of goods surged 11.7% in the fourth quarter and grew 10.2% for 2006 as a whole, marking double-digit growth for the fourth year in a row. This is mainly due to the generally resilient global economy, the Mainland’s robust trade flows and the competitiveness gain from the weakening of the Hong Kong and U.S. dollars.
Exports of services increased 7.5% in the fourth quarter, resulting in a full-year growth of 8.7% in 2006. In January, merchandise exports showed notable growth at 9%. However, the year-on-year comparison might be skewed by the difference in timing of the Lunar New Year holidays, which fell in January 2006 and February this year. Combining the trade figures for January with those upcoming for February will provide a clearer picture of latest trade performance.
The trade outlook for 2007 remains good, with the support of a thriving Mainland economy and its vibrant trade flows, and sustained economic expansion in Europe and Japan. The general weakness of the U.S. dollar, if continued, also would boost Hong Kong’s external competitiveness.
PROPERTY: Improved sentiment
Sentiment in the residential property market improved somewhat in January. The number of agreements for sale and purchase increased modestly compared to December. Apart from a mild increase in trading volume, apartment prices largely stabilized after several months of declines. Residential rentals kept their upward momentum with a month-to-month rise of 1% in January.
Both office and retail rentals increased further amid vibrant business activities. Office prices rose notably in January, led by some sizable increases in the price for Grade A offices. Rentals for retail properties also edged up during the month.
LABOR MARKET: Unemployment at 4.4%
 Sustained brisk economic expansion kept the labor market active. In November-January, total employment surged to another record high of more than 3.47 million, marked by gains in such sectors as the distributive and catering trades. On a year-on-year basis, total employment grew 3.1%, outpacing the 2.3% growth in labor supply.
The number of unemployed fell below 155,000 in the three-month period, the lowest seen in more than five years.
After discounting the effect of the usual surge in business activity in the run-up to the Lunar New Year holidays, the seasonally adjusted unemployment rate remained unchanged at 4.4%, the lowest level in six years. Underemployment rate edged up to 2.4% from 2.3%.
COMPOSITE CPI: Inflation decreases slightly
 Consumer price inflation fell to 2% in January from 2.3% in December. The lower inflation reading is attributed mainly to the difference in the timing of the Lunar New Year Festival. Taking this distortion into consideration, the underlying inflation remained moderate in January.
Looking ahead, the sustained rise in labor productivity and the expected ebbing impetus from shop rental rise should render a cushion against the expected increase in imported inflation stemming from a weak U.S. dollar and renminbi appreciation. After factoring in the rate waiver for two quarters as announced in the 2007-08 Budget and various other one-off measures announced earlier, which will push down the CPI, inflation is forecast at 1.5% for 2007.
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