Hong Kong: GDP growth decelerates in the first quarter
May 13, 2016
Hong Kong’s economy weakened in the first quarter of the year, as it continues to suffer from the slowdown in the Chinese mainland. GDP expanded 0.8% in Q1 over the same quarter last year, which was below the 2.0% increase tallied in Q4 2015 and marked the softest rise in four years. The print came in below market expectations of 1.5% growth.
The slowdown in Q1 mainly reflected a contraction in fixed investment, a deceleration of private consumption and a poorer performance of the external sector, which more than offset broadly-steady government consumption. Private consumption grew 1.1% in Q1, which was below the 2.7% increase tallied in Q4 and the lowest result since Q2 2009. Fixed investment fell a sharp 10.1% in Q1 (Q4: -9.4% year-on-year). However, amid strained economic conditions since autumn 2015, the government has been boosting its expenditure at a healthy rate and government consumption increased 3.2% in Q1, which was broadly in line with Q4’s 3.3% expansion.
On the external front, exports of goods and services fell 3.9% in Q1, which was below the 1.0% drop tallied in Q4. Imports also contracted at a sharper rate, recording a 4.4% fall in Q1 (Q4: -2.0% year-on-year). The contractions of both exports and imports marked the steepest falls since Q3 2009. As a result, the external sector’s net contribution to overall economic growth fell from 2.2 percentage points in Q4 to 1.0 percentage point in Q1.
A quarter-on-quarter comparison shows a contraction of economic activity. Hong Kong’s economy contracted a seasonally-adjusted 0.4% in Q1, which contrasted Q4’s 0.2% increase and marked the softest reading since Q2 2011. The result comes against the backdrop of sluggish global growth, especially in China, which is straining economic activity in Hong Kong.