Hong Kong July retail sales up 14.2 pct by value on growth, tourism

Sep 3, 2007 - Hong Kong retail sales rose faster than expected, growing 14.2 percent in July from the year earlier to 21.3 billion Hong Kong dollars.

The rise was supported by strong economic growth and an increase in tourists, drawn in by activities linked to the 10th anniversary of the handover of the former British territory to China.

The growth in sales beat June's 14.3 percent increase and the consensus estimate of a 9.9 percent gain from economists polled by Thomson IFR.

"The growth momentum in the volume of retail sales remained vigorous and broad-based," a government spokesman said in a statement Monday. "This reflected the upbeat consumer sentiment on the back of robust economic fundamentals."

Gains in the stock market, rising wages, a falling jobless rate and the arrival of more tourists also helped boost sales of cars and electronic goods, the spokesman said.

The Hong Kong economy expanded 6.3 percent in the first half of this year from same period in 2006 and the government last month raised its full-year growth forecast to 5-6 percent from 4.5-5.5 percent.

Retail sales contribute about a fourth of Hong Kong's gross domestic product, said Dave Cohen, director of Asian economic forecasting at Asian Economics in Singpaore.

Tourist arrivals rose 12.3 percent in July from a year ago, according to the government. Visitors from mainland China, which account for 57 percent of the total, rose 16.2 percent.

"The improving unemployment rate and GDP growth in the first half is convincing consumers to spend in the period," said Paul Tang, chief economist at Bank of East Asia, who forecast a retail sales growth of 10 percent for July.

Hong Kong's jobless rate fell to 4.1 percent in May-July, down from 4.2 percent in April-June, the government said last month.

By volume, retail sales rose 12.1 percent in July from a year ago, above the 7.2 percent forecast in the IFR Thomson survey.

Sales of motor vehicles and parts increased 56 percent, the highest growth among the items monitored by the government. Sales of electronic goods and cameras rose 37.4 percent, while sales of jewellery, watches and other valuable gifts increased 20 percent, the government said.

"Retail sales will continue to boom and the outlook is bright for the Hong Kong economy," Cohen said. "This is supported by the strong tourist traffic coming from China and the expected investment from Chinese citizens in the stock market."

China on August 20 allowed residents to buy Hong Kong shares, though until now the plan has not yet been implemented.

Cohen expects retail sales by value to grow 10 percent this year, faster than 2006's 7.2 percent.

Bank of East Asia's Tang, however, expressed some caution.

"Concerns over a possible slowdown in the US economy could hurt sentiment going forward and possibly appear in the data sometime late this year or early next year," Tang said. "Consumer spending patterns may change around yearend if the US economy turns for the worse."

(1 US dollar = 7.80 Hong Kong dollars)