External sector remains resilient
 The external sector so far has stayed resilient to growing uncertainties in the trading environment. In the first quarter of 2008, exports of services grew 10.8% in real terms, buoyed by financial services as well as by vibrant offshore trade and inbound tourism. Exports of goods grew a notable 8.3% in the first quarter, which continued in April. The rapid growth in the Mainland’s trade flows and intraregional trade, as well as the continued expansion of the European Union market, together more than offset the continued weakness of the U.S. and Japanese markets.
Consolidation in residential property market
The residential property market consolidated somewhat in March and April as buyers and investors adopted a more cautious attitude amid growing uncertainties in global economic prospects and financial markets. Trading activities, as indicated by the total number of sale and purchase agreements, recorded month-to-month decreases of 24% and 5%, respectively, in March and April. Apartment prices and rentals also eased in April, after some mild increases in March. The stable labor market, income growth and low interest rates are expected to prop up the property market.
Consumer sentiment remains upbeat
Domestic demand continued to play a key role in driving the economy forward this spring. Consumer sentiment has remained upbeat amid a solid labor market and rising incomes. Private consumption expenditures grew 7.9% in real terms in the first quarter compared to a year earlier. Local spending displayed further strength in April, with retail sales in volume terms expanding 11.6%. Further growth of inbound tourism also supported the retail sector.
Investment growth up in first quarter
 Investors’ confidence stayed strong as growth in investment accelerated to 8.9% in real terms in the first quarter of 2008. Investment in machinery and equipment continued to rise notably in light of continued expansion of general economic activity. Overall building and construction activities also increased solidly, by 5.2% in real terms, with public sector construction rebounding notably from a low base. According to retained imports statistics, the intake of capital goods recorded some year-on-year declines in March and April, partially due to a high base of comparison. However, large business establishments have remained generally optimistic about the near-term, as evidenced by the latest Quarterly Business Tendency Survey. Low interest rates should also be favorable to investment spending.
Labor market remains stable
 The seasonally adjusted unemployment rate for February-April edged down to 3.3%, back to the lowest levels in more than 10 years. The performance of the labor market in the months ahead will hinge on how the slowdown in global economic growth affects the domestic economy.
Inflation up amid global food price hike
Inflationary pressures went up in April and May on the back of surging food prices and the strength of the local economy. Underlying the Composite Consumer Price Index (CCPI), inflation reached 5.3% and 5.4%, respectively, in March and April, up from an average of 4.8% in the first two months of 2008. The headline CCPI inflation in March was 4.2%, with some relief from the rates concession. The corresponding figure for April was 5.4% due to the offsetting effects between the rates concession in April and in April 2007.
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