Hong Kong: Economy posts solid performance in Q2 despite slight deceleration
August 11, 2017
The economy posted a strong performance in Q2, with GDP expanding 3.8% over the same quarter of last year. Although the impressive print came in below the 4.3% increase registered in Q1, growth landed above market expectations of a 3.5% expansion. Moreover, the solid expansion was underpinned by broad-spectrum growth, a still-healthy external sector and gains in fixed investment. That said, the deceleration from Q1 was the result of a slower expansion in exports, despite exports growth posting its second-strongest quarter in more than three years. Furthermore, in response to stellar back-to-back GDP reports thus far this year, the government upgraded its growth forecasts for 2017 by 1.0 percentage point, from between 2.0%–3.0% to 3.0%–4.0%.
Domestically, the expansion in Q2 was the result of a sharp acceleration in private consumption, which grew 5.3% over the same quarter of last year (Q1: +3.9% year-on-year) in what was its strongest performance in two years. Moreover, fixed investment grew 8.0% in annual terms (Q1: +5.9% yoy) and was driven by a rebound in spending on machinery and intellectual property products, while building and construction expenditures decelerated as Hong Kong’s booming property market took a small breather from a quarter earlier. Growth in government spending, for its part, narrowly accelerated to 3.2% (Q1: +3.1% yoy).
On the external side, growth in exports of goods and services slowed to 5.0% (Q1: +8.1% yoy) in what was a still-impressive result that rode the recent pickup in global demand. Likewise, growth in imports also slowed—albeit less sharply—to 5.9% (Q1: +8.8% yoy). Consequently, the external sector’s net contribution to overall growth was a sizeable minus 1.9 percentage points (Q1: minus 1.1 percentage points).
On a quarter-on-quarter basis, Hong Kong’s economy grew a seasonally-adjusted 1.0% in Q2, which was above Q1’s 0.7% increase.
Author: Lindsey Ice, Economist