Hong Kong: GDP growth picks up in the second quarter
August 12, 2016
Hong Kong’s economy accelerated in the second quarter of the year, despite headwinds that came mainly from the slowdown in China. GDP expanded 1.7% in Q2 over the same quarter last year, which was well above the 0.8% increase tallied in Q1 2016. The print beat market expectations of 0.9% growth.
The acceleration in Q2 mainly reflected a softer contraction in fixed investment, persistent growth in government consumption and a rebound in exports. Conversely, private consumption decelerated further and grew just 0.6% in Q2, which was below the 1.1% increase tallied in Q1 and marked the lowest result since Q2 2009. Fixed investment fell a softer 4.9% in Q2 (Q1: -10.1% year-on-year). Government consumption increased 3.4% in Q2, which was more than Q1’s 3.2% expansion. Thanks to a fiscal surplus and low public debt, the government has been able to support economic activity and soften headwinds from the private sector. In fact, government consumption has been growing at an average rate of 3.3% over the last two years.
On the external front, exports of goods and services inched up 0.6% in Q2, which was an upswing from the 3.9% drop tallied in Q1. Imports also rebounded, recording a 0.3% increase in Q2 (Q1: -4.4% yoy). As a result, the external sector’s net contribution to overall economic growth fell from 1.0 percentage point in Q1 to 0.6 percentage points in Q2.
A quarter-on-quarter comparison shows a similar picture of a mild recovery. Hong Kong’s economy grew a seasonally-adjusted 1.6% in Q2, which contrasted Q1’s 0.4% decrease and marked the strongest reading since Q1 2011.
Hong Kong’s economy has been facing bleak conditions in the first six months of the year. Sluggish global activity and in particular the slowdown in China dragged on the island’s important trade and retail sectors in the first quarter. However, regional shipping volume improved in the second quarter and supported Hong Kong’s economic activity. For the second half of the year certain external risks persist, as Research Analyst Young Sun Kwon from Nomura states:
“We see both upside and downside risks to our new outlook. The latest visitor arrivals trend suggests that the drag from the slowdown of inbound tourism has been reducing. If this continues, it may help services exports and retail sales. However, downside risks include the uncertainty about US monetary policy and slower Chinese economic growth.”