Business | Economy
People spend less amid deepening crisis
Residents of Hong Kong probably reined in spending in October, amid deepening turmoil in financial markets and rising job insecurity, with sales volumes forecast to decline for the
- Reuters
- Published: 00:41 December 2, 2008
Hong Kong (Reuters) Residents of Hong Kong probably reined in spending in October, amid deepening turmoil in financial markets and rising job insecurity, with sales volumes forecast to decline for the first time since January 2007, a survey shows.
The survey estimated a 0.5 per cent dip in the volume of October retail sales from a year earlier. It projected a 3.3 per cent rise in the value of sales, the slowest growth since April last year.
"The outlook is more pessimistic," said Joanne Yim, chief economist at Hang Seng Bank. "The asset markets have yet to find their bottoms and the unemployment rate has reverted to an uptrend."
The forecasts for October sales would mark a sharp slowdown from previous months: Retail sales by value increased 14.1 per cent in the first nine months of this year from a year earlier and rose 7.6 per cent by volume.
September sales, totalling HK$20.9 billion (Dh9.9 billion), rose 6.9 per cent by value and 1.8 per cent by volume.
Hong Kong's economy slipped into recession in the third quarter and is unlikely to rebound until the second half of next year as its key trade and finance sectors are being hit by the global financial and econ-omic downturn.
The weak economy has already prompted some lay offs, notably at investment banks, and is making many people who are in work worried about their job security and more reluctant to spend, analysts said.
Consumer confidence in October was rocked by a highly volatile stock market and continued weakening of the property market. A drop in tourism compared with October last year would also have hurt sales as tourists account for 20-25 per cent of retail sales, analysts said.
Hang Seng Bank now expects retail sales volume to rise 4.8 per cent and 1.3 per cent in 2008 and 2009, respectively, down from its previous growth forecast of 6 per cent and 2 per cent, Yim said.
A global survey by the Nielsen Company published last month showed Hong Kong suffered one of the sharpest declines in consumer confidence in the world between the first and second halves of this year.
Hong Kongers, big investors in the stock market, are feeling the impact of heavy losses on the stock market as well as a downturn in house prices. As depressed corporate profits are likely to crimp wage growth next year and force more lay-offs, consumer confidence is expected to deteriorate further, prolonging the economic slump.
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