Hong Kong: Economy slows amid weakening external demand
November 11, 2011
In the third quarter, GDP expanded 4.3% over the same quarter last year, which was below the revised 5.3% growth recorded in Q2 2011 (previously reported: 5.1% year-on-year). The reading came in virtually in line with market expectations of a 4.2% expansion. The slowdown reflected a significant deterioration in net exports, mitigated by resilient domestic demand amid stable labour market conditions and rising incomes. Domestic demand improved, as gross fixed investment strengthened from a 7.0% increase in the second quarter to a 10.2% expansion in the third, and private consumption remained strong with an 8.8% expansion. In contrast, the external sector deteriorated further as exports contracted while imports continued to expand. Exports of goods and services contracted 0.4% in the third quarter, owing to sluggish demand from the U.S. and Europe, while imports rose 1.4%. As a result, the external sector's net contribution to overall growth deteriorated from minus 2.1 percentage points in the second quarter to a 4.0 percentage-point detraction in the third. A quarter-on-quarter comparison does not corroborate the deceleration suggested by the annual figures, as the economy gained 0.1% over the second quarter in seasonally adjusted terms, contrasting the 0.4% drop recorded in the previous quarter. As a result of the deterioration in the external sector, the government now expects GDP to expand by 5.0% this year, the lower boundary of the previous range forecast of between 5.0% and 6.0%.