Hong Kong: GDP growth records quickest expansion since Q4 2021 in Q3
GDP growth gathered steam to 4.1% year on year in the third quarter from 1.5% in the second quarter. Q3’s reading marked the fastest increase since Q4 2021 but undershot market expectations. On a seasonally-adjusted quarter-on-quarter basis, economic growth clocked 0.1% in Q3, contrasting the previous period’s 1.3% contraction.
Private consumption growth fell to 6.5% in Q3, marking the weakest expansion since Q4 2022 (Q2: +7.7% yoy). However, the data was still robust, and was likely supported by government fiscal handouts and low inflation. Public consumption declined at a more moderate pace of 4.5% in Q3 (Q2: -9.8% yoy). Fixed investment growth hit an over two-year high of 18.2% in the third quarter, contrasting the second quarter’s 0.5% contraction but mainly the result of a fairly favorable base of comparison.
Exports of services growth accelerated to 24.0% year on year in the third quarter, which marked the best reading since Q2 2004 (Q2: +22.8% yoy) and was driven by surging tourism. In addition, imports of services growth sped up to 28.5% in Q3 (Q2: +25.4% yoy) on higher outbound tourism by Hong Kong residents. In contrast, exports and imports of goods continued to fall notably in Q3 due to weak global goods trade—Hong Kong’s trade is dominated by re-exports to and from mainland China.
Our Consensus is for both year-on-year and quarter-on-quarter GDP growth to accelerate in Q4 from Q3, though recent disappointing PMI and export data in mainland China poses some downside risks to these forecasts given the mainland’s importance to Hong Kong’s economy.
On the outlook, United Overseas Bank’s Ho Woei Chen said:
“We remain positive on the private consumption recovery in Hong Kong but see some drag from the tighter financial conditions and weaker property market outlook. Despite the easing of Hong Kong’s property market curbs for the first time in more than a decade, near-term sentiment is generally expected to remain soft due to the economic uncertainties.”
On the impact of tourism on the economy ahead, Nomura analysts said:
“Mainland visitors to Hong Kong have returned to around 100% of 2019 levels during the Golden Week [in October]. This is clearly above the 91.6% recovery rate during the entire Q3. Hence, we remain relatively optimistic on the continued support from inbound Mainland tourists to local consumption, but we believe any expectation by markets of spending per visitor returning to pre-pandemic levels should be curbed.”