Hong Kong retail sales fall as slow reopening puts off recovery

HONG Kong’s retail sales surprisingly contracted in August as Covid restrictions and other global headwinds hobble the city’s attempt at averting recession.

Retail sales value dropped 0.1 per cent in August from a year ago, the Census and Statistics Department said on Friday (Sep 30). That was far lower than the median forecast of a 2.7 per cent rise by economists surveyed by Bloomberg, and well below the 4.1 per cent uptick in July.

Sales volume decreased 2.9 per cent from a year ago, compared to economists’ expectations of a 1.3 per cent rise.

Hong Kong’s economy has been battered by 3 years of isolation under the pandemic, with the city only recently eliminating hotel confinement altogether. August’s data captures a period during which the city cut hotel quarantine to 3 days from 7.

A government spokesman said on Friday that a batch of spending vouchers released in August may help to boost the sector, though “the increasingly tight financial conditions will pose constraints.”

The next round of vouchers will be released on Oct 1, though some analysts suspect Hong Kong residents might use that money on trips abroad, now that they do not have to quarantine in a hotel upon their return.

“That consumption might not stay in Hong Kong, and I don’t think Hong Kong will receive massive amounts of tourists because China remains closed, and this is the bulk of tourism into Hong Kong,” said Alicia Garcia Herrero, Asia Pacific chief economist at Natixis, in reference to the tough Covid Zero curbs that remain in the mainland.

The retail data covers consumer spending on goods but not services such as catering, medical care and entertainment. Those services account for over 50 per cent of total consumer spending.

Financial Secretary Paul Chan, meanwhile, has blamed the weak external environment on what may be a contraction this year in the city’s gross domestic product. The city is also headed for a financial deficit for the second time in 3 years: It’s expected to report a deficit of more than HK$100 billion (S$18.3 billion) for the 2022-23 fiscal year, almost double the government’s estimate. BLOOMBERG