Hong Kong's retail-sales growth slowed for a third-straight month as a stock-market decline and higher inflation dampened consumer sentiment.

By value, retail sales climbed 11.6 percent in June from a year earlier to HK$22.2 billion, the government said on its Web site yesterday. The figures followed May's revised increase of 13 percent.

The city's benchmark Hang Seng Index fell 9.9 percent in June on concerns that a global slowdown will erode company profits. Higher food, fuel and housing costs have left people with less to spend.

"After adjusting for inflation, retail sales have slowed significantly as the stock-market decline and higher inflation curb consumers' purchasing power," said Irina Fan, a senior economist at Hang Seng Bank in Hong Kong. "This will have an impact on economic growth."

By volume, retail sales increased 4 percent in June from a year earlier after rising a revised 5.6 percent in May, the government said.

Hong Kong's consumer confidence fell in the second quarter to its lowest level in three-and-a-half years, according to a report published last month by MasterCard Inc, a US credit-card company, as residents became less optimistic about the economy, jobs and income.

Inflation accelerated to 6.1 percent in June, more than three times the 2 percent pace for all of 2007, partly because a fixed exchange rate boosted import costs.

Hong Kong's economy expanded 7.1 percent in the first quarter, its fastest pace in two years. Household consumption climbed 7.9 percent, its lowest rise in nine months.

Still, while unemployment is at a decade low, reduced interest rates, tax cuts and government subsidies may sustain retail sales.

For the first six months, retail sales by value rose 15.9 percent from a year earlier and 9.3 percent by volume, the government said. That's compared with 12.8 percent and 10.1 percent, respectively, for all of 2007.

Bloomberg

(HK Edition 08/01/2008 page2)