Hong Kong: Economy slows in the second quarter
August 12, 2011
In the second quarter, GDP expanded 5.1% over the same quarter last year, which was below both the revised 7.5% growth recorded in Q1 2011 (previously reported: 7.2% year-on-year), and market expectations of a 6.0% expansion. The slowdown reflects reflected a significant deterioration in net exports, mitigated by resilient domestic demand. Domestic demand improved substantially, as gross fixed investment rebounded from a 0.3% contraction in the first quarter to an 8.1% expansion in the second, and private consumption strengthened (Q1: +8.0% yoy; Q2: +9.2% yoy). In contrast, the external sector deteriorated as imports outpaced exports, a partial result of the earthquake in Japan, which put a temporary brake on the regional supply chain. Exports of goods and services grew 1.7% in the second quarter, well below the 15.1% expansion in the first, while imports rose 2.6% (Q1: +11.9% yoy). As a result, the external sector's net contribution to overall growth swung from a 6.6 percentage points contribution in the first quarter to a 2.0 percentage points detraction in the second. A quarter-on-quarter comparison points to a deeper deceleration than the annual figures, as the economy contracted 0.5% over the second quarter in seasonally-adjusted terms, contrasting the strong 3.1% expansion in the first quarter. Despite the deceleration, the government maintains its GDP forecast unchanged, and expects the economy to expand between 5.0% and 6.0% this year.