Hong Kong GDP

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Hong Kong: Economy decelerates to nearly two-year low in Q2

August 15, 2014

In the second quarter, the economy expanded 1.8% over the same quarter last year. The reading came in well below the revised 2.6% expansion tallied in the previous quarter (previously reported: +2.5% year-on-year) and undershot the 2.4% increase the market had expected. Moreover, the print marked the weakest growth rate since Q3 2012.

The moderation recorded in Q2 mainly reflected a slowdown in domestic demand. Private consumption expanded at its slowest pace since Q3 2009, increasing 1.2% in Q2 (Q1: +2.0% yoy), whereas public spending picked up slightly to a 2.7% rise (Q1: +2.6% yoy). In addition, gross fixed investment contracted 5.6% in Q2 (Q1: +3.5% yoy), which marked the lowest rate since Q2 2009.

On the external front, exports of goods and services grew 1.4% in Q2, which was above the 1.1% increase tallied in Q1. Imports rose a slightly stronger 1.5% in Q2, which was also up from the 1.0% increase registered in the previous quarter. As a result, the external sector’s net contribution to overall economic growth swung from plus 0.2 percentage points in Q1 to minus 0.3 percentage points in Q2.

A quarter-on-quarter comparison confirms the deceleration suggested by the annual data; the economy contracted a seasonally-adjusted 0.1% in Q2, which contrasted the 0.3% increase tallied in Q1.

As a result of the weak Q2 growth, the government slashed its growth forecast for this year from the 3.0% to 4.0% expected in May to between 2.0% and 3.0%. FocusEconomics Consensus Forecast panelists see the economy growing 2.9% in 2014, which is down 0.1 percentage points from last month’s forecast. For 2015, the panel expects the economy to grow 3.3%.

Author: Ricard Torné, Lead Economist

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Hong Kong GDP Chart

Hong Kong GDP Q2 2014

Note: Year-on-year changes of GDP in %.
Source: Census and Statistics Department Hong Kong and FocusEconomics Consensus Forecast.

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