Hong Kong: Retail sales nose-dive in August
September 30, 2016
Hopes last month that a recovery in retail sales might be underway were dampened in August on the back of declining numbers of mainland tourists. In August, retail sales plummeted 12.7% over the same month last year, deteriorating from the 8.4% decrease recorded in July. August’s reading, which was the tenth consecutive decline, mainly reflected collapsing volumes of jewelry and watch sales and a plunge in sales of consumer durable goods. Stormy weather and the Rio Olympics drove a surprising contraction in tourist numbers in August, which dragged on sales of luxury products. Looking forward, the implementation of a tax cut on cosmetic products in mainland China, which, together with medicine products, account for 10% of total retail sales in Hong Kong, will add further downward pressure to sales volumes, as it will encourage Chinese consumers to buy cosmetic products on the domestic market rather than travelling to the island to buy them.
Retail sales decreased 2.2% in the three-month period ending in August compared to the three-month period ending in May. August’s figure was down from the flat reading observed in July.
A government spokesman indicated that, “the weak performance of retail sales continued in August, reflecting the drag from the decline in visitor arrivals in that month as well as the cautious consumer sentiment amid an uncertain economic outlook. The near-term outlook for retail sales will still hinge on the performance of inbound tourism and the extent to which local consumer sentiment will be affected by various external headwinds.”
Author: David Ampudia, Economist