EXTERNAL TRADE: Moderate growth
Total exports of goods expanded moderately by 4.4% in real terms in the second quarter of 2008. The demand from mainland China and other emerging economies, which held firm during most of the second quarter, as well as the continued expansion in the EU economy, provided the major support. The growth in the value of total exports of goods moderated further taking July and August together. Nevertheless, economic growth in the Mainland will continue to render support to the Hong Kong economy.
Exports of services grew 7.1% in real terms in the second quarter, although the adverse impact on various financial service activities due to the ongoing global financial turbulence was increasingly noticeable.
RETAIL SALES: Consumer spending moderates
The growth of consumer spending decelerated in the second quarter after a long period of exceptionally strong performance, against the backdrop of the stock market correction, pick-up in inflation and gloomier global economic outlook, which had probably dented consumer sentiments. Private consumption expenditure rose 3.1% in real terms in the second quarter compared to a year earlier.
Retail sales in volume terms stayed firm, expanding by 5.2% in July and August combined despite the concurrent corrections in the local stock market, as well as the stay-home effect and the fall-off in inbound tourism around the period of the 2008 Olympic Games in August.
Looking ahead, the steep corrections in the local stock market in the ensuing period and the resulting pressure on other local asset markets, together with the dimmer economic outlook overall, should weigh on consumer sentiments.
INVESTMENT SPENDING: 4.3% growth
Overall investment spending grew by 4.3% in real terms in the second quarter of 2008, notwithstanding the higher base of comparison in the same quarter of last year. This was mainly attributable to the 6.5% growth of machinery and equipment investment, which outstripped the 1.7% decline in building and construction activities. The latest retained imports data indicated that capital intake expanded at an encouraging pace in July and August combined. Yet business confidence in the near term is likely to be restrained by the abrupt worsening in the financial market.
LABOR MARKET: Unemployment rate at 3.2%
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Note: (*) Figures used are 3-month averages |
The seasonally adjusted unemployment rate for June-August 2008 remained at a relatively low level of 3.2%. The underemployment rate also lingered at a low level of 1.9%. Both labor wage and payroll continued to rise in the second quarter of 2008, albeit at rates slower than the consumer price inflation. However, with the economic prospects being increasingly affected by the adverse external environment, companies appear to be becoming more cautious in hiring new hands.
PROPERTY: Residential market consolidates
The residential property market consolidated further in recent months, as the dimmer global economic outlook and deterioration in the global financial market conditions are likely to drag down the appetite of prospective buyers and investors.
Trading activities in August and September combined, as indicated by the total number of sale and purchase agreements, fell. Apartment prices declined for the second consecutive month in August. Apartment rental also registered a month-to-month decline in August.
COMPOSITE CPI: Inflation eases
 The underlying consumer price inflation reached 6.3% in both July and August. While food prices remained notably higher compared to a year earlier, they showed some signs of levelling off, and thus provided some offset to the inflationary pressure imposed by the higher increase in private housing rentals due to the continued feed-through of the high level of fresh rentals earlier on.
Headline consumer price inflation was also 6.3% in July, but eased notably to 4.6% in August. The drop was mostly due to the government’s payment of three-month public housing rentals on behalf of the lower-income tenants that started to take effect in August. This and the electricity subsidies to be rolled out in September will provide a more notable drag to the headline consumer price inflation in the coming months.
The upside risks to inflation are likely to recede, given the recent easing of food and energy prices in the international markets and the rebound of the U.S. dollar. The expected moderation in economic growth should also reduce somewhat the domestically generated inflationary pressures in the period ahead.
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