In the first quarter of 2016, Hong Kong’s economy had contracted 0.4 percent on sequential basis and grew 0.8 percent on year-on-year basis. This was the first contraction since 2014 amidst weak retail sales and trade sectors, sluggish consumer demand and cautious business spending.
Fewer visitors and subdued tourist expenditure further weighed on retail sales in April. Moreover weaker trade growth led to high jobless rate in the trade and wholesale sector. Downtrend in retail and tourism sector continue to be present because of fewer tourists and tepid spending and cautious consumer confidence.
Hong Kong’s retail sales’ value dropped for the 14th consecutive month in April. It declined 7.5 percent year-on-year to HKD 35.2 billion. The retail sector continues to be in doldrums amidst fewer tourists and weaker tourists spending. The luxury segment has weighed majorly on the nation’s retail sales, with the sales value of watches and jewellery, declining for the 19th consecutive month by 16.6 percent in April.
Given the dull outlook for the country’s retail sector, Hong’s Kong’s retail property market might drop further even as retail shop rentals and prices declined 1.3 percent year-on-year and 7.8 percent year-on-year respectively in March. Additional rental concession and higher vacancy rates in core business district might be likely, noted OCBC Bank in a research report.
In April, jobless rate in the retail sector grew to 5.3 percent amidst subdued tourist activities and luxury consumption. This was disappointing as compared to an average of 4.4 percent in 2014. This is due to weak business performance in retail sales in the midst of contracting tourist spending. The Hong Kong’s retail sector is expected to be limited by subdued inbound tourism activities amidst downturn in Chinese economy and external uncertainties. This might be a drag on employment in the retail sector.
“Overall, HK’s labor market may worsen further with unemployment rate expected to rise to 3.5 percent over 2016,” added OCBC Bank.