Hong Kong: Retail sales continue to contract in March as economic momentum stalls
Retail sales by volume fell 0.8% year-on-year in March, up from the 1.9% decline registered in the Lunar New Year period of January-February. The print was driven by a sharp contraction in sales of consumer durable goods, slightly lower supermarket sales, and a modest decline in sales of luxury goods, and clothing and footwear.
On a seasonally-adjusted, three-month-moving-average basis, retail sales volume in the January–March period rose 0.2% from the preceding three-month period ending in December, contrasting the 1.2% fall recorded in the December–February period. Overall, the annual average variation in retail sales volume fell from a revised 5.0% in the 12 months up to February (previously reported: +5.1%) to 4.1% in the period ending in March.
Turning to the short-term prospects, the softer private spending observed in the first quarter of 2019 should continue to be weighed in Q2 by the persistent drag of the trade spat between China and the United States, and an ongoing slowdown in the mainland. On the other hand, recent stimulus measures in China appear to have started feeding through to the economy, which could cushion the country’s deceleration, while also providing some support to private consumption dynamics in Hong Kong.
Commenting on the outlook, a government spokesperson further noted that “retail sales business should continue to be affected by various external uncertainties in the near term, but the largely stable labour market and the sustained growth in inbound tourism should provide some support”. Nevertheless, the evolution of U.S.-China trade talks in coming weeks will be a crucial factor affecting economic momentum.