Shoppers walk past stalls at the "ladies market" in Hong Kong. Over the first three months this year, retail sales grew 21 percent by value and 16.3 percent by volume year-on-year. Mike Clarke / AFP

Inflation, better labor market lie behind growth

Hong Kong's retail sales value rose 26 percent in March from a year earlier, boosted by better job and income conditions and more tourist arrivals, the Census and Statistics Department said on its website Tuesday.

Total retail sales for March was provisionally estimated at HK$31.2 billion in value, a rise of 26 percent year-on-year. After adjusting for inflation, retail sales grew 20 percent by volume from a year ago.

The March figures came after the growth in retail sales value eased markedly to 8.5 percent in February from the January gain of 28.1 percent.

The big difference, a government spokesman noted, had much to do with the greater volatility usually seen in the first two months of a year.

Taking the first three months together, retail sales grew 21 percent by value and 16.3 percent by volume compared with the same period a year ago.

Notable growth was seen in the sales volume of consumer durables, up by 85.9 percent, followed by sales of jewellery and watches, which rose 42.3 percent. Motor vehicles and parts followed with a volume increase of 32.2 percent. Clothing sales gained 23.3 percent.

In a statement after the release of the March figures, a government spokesman attributed the strong growth to "buoyant local consumption demand", supported by an improving job market, and robust tourist spending.

The city's jobless rate dropped to 3.4 percent in the three months through March, its lowest level since September 2008.

And the sanguine consumer sentiment that comes as a result of improving job prospects will help retail business growth, the spokesman added.

Irina Fan, a senior economist at Hang Seng Bank, agreed that more jobs and rising wages would help retail businesses. But Fan called attention to the "price signal" the newly released data sent out.

Much of the growth in sales value has not resulted from volume increases, she noted.

"All the changes come from the price," said Fan. And a closer look at the detailed statistics will lay bare mounting inflationary pressures.

Sales of food, alcoholic drinks and tobacco, which rose 12.1 percent by value in March, grew by a negative 0.3 percent in volume terms. Sales of fuels, which recorded a respectable 14.4 percent gain by value, rose by a meager 2.2 percent by volume.

Further price increases will inevitably erode people's purchasing power, Fan warned.

Retail sales value can still see "decent growth" ahead, she reckoned, but volume will be "growing slowly".

For the full-year 2011, the Hang Seng economist forecast a value growth of 15 percent and a volume increase of 10 percent.

China Daily

(HK Edition 05/04/2011 page2)