Hong Kong’s economic growth cools as spending boom lets up

HONG Kong’s economy expanded more slowly last quarter, as the spending boom that helped the city exit a recession began to run out of steam.

Gross domestic product rose 1.5 per cent in the April-to-June period from a year before, according to advance estimates released by the government on Monday (Jul 31). That was weaker than the median estimate of 3.5 per cent in a Bloomberg survey of economists, and slower than the 2.7 per cent growth recorded in the first quarter.

Financial Secretary Paul Chan previewed the data on Sunday in a blog post, in which he flagged the possibility that year-on-year growth “may be slightly slower” than in the first three months. He said, however, that the economy was still on track to improve this year, as consumer spending continues to pick up and the external environment gradually improves.

Monday’s data showed household spending growing 8.5 per cent in the April-to-June period from the year prior – weaker than the 12.5 per cent expansion in the January-to-March quarter. 

The city also recorded a pullback in several areas: While goods exports fell slightly more slowly than in the first quarter, those overseas shipments still recorded a double-digit decline. Imports fell 16.1 per cent. Government spending declined 9.6 per cent, compared to a 0.5 per cent rise in the first quarter.  

The city is starting to recover after years of pandemic controls hammered the economy and spurred an exodus of residents. The economy emerged from recession in the first quarter, after borders were reopened and spending increased. 

Still, the government sounded some optimism over the state of the economy. 

“The improving economic situation and prospects should bode well for domestic demand,” a government spokesperson said in a statement released with the data. “In particular, improving labour market conditions, together with the government’s various measures to boost the momentum of the recovery, will provide additional support for private consumption.”

The spokesperson warned that “tight financial conditions may impose constraints”. Goods exports will also face pressure, the person said.

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Chan said in the Sunday blog post that consumer habits have changed after three years of pandemic controls, which could affect the outlook. Residents have reduced their spending in the evening, and neighbouring Shenzhen has emerged as a popular tourist and shopping destination, he said.