The ongoing global financial turmoil is leading to unprecedented pessimism over the city's economy, a survey revealed.

The Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) interviewed 928 people about their confidence in the economy over the telephone between September 26 and October 2.

The DAB has been conducting such study since 2004 to gain an understanding of the public's confidence indicated by three indexes: one on consumer sentiment (ICS), one on consumer expectations (ICE) and one on current economic conditions (ICC).

"All three indexes hit a 4-year low, which reflects the negative sentiment of the public toward the local economy and their own financial status," said member-designate of the Legislative Council Starry Lee.

The ICS, ICE and ICC were respectively recorded at 56.2, 55.3 and 57.5. Lee said it was the first time to see all three indexes below 60. The survey defined indexes below 100 as negative.

According to the survey, 61.5 percent of the respondents said their financial status worsened in the past year, while 50.6 percent expected their status to go downhill in the next year.

"The financial crisis dealt a blow to consumers' confidence, particularly when their increase in salary cannot catch up with the soaring inflation," Lee said, adding that unemployment was another top concern of the public.

Meanwhile, the bankruptcy of Lehman Brothers as well as the United States government's bailout to prevent the American International Group from collapse also cast a shadow over the public expectation on the economy.

Approximately 65 percent of the respondents showed pessimism about the local economy in the next year.

Lee said it is surprising to know that respondents earning over HK$10,000 per month were gloomier about the economic forecast than those from the low income group.

"They (high income earners) are relatively more knowledgeable about the macro-economy which is the reason why they are more worried," she explained.

The obscure future also weakens the purchasing power of the public, as almost half of the respondents said they would not buy luxury goods such as cars and furniture at present.

Although Hong Kong is currently maintaining a healthy status, the government should apply decisive tactics to revive the public's confidence in the economy, Lee said.

To learn from the incident over Lehman Brothers mini-bonds, Lee suggested the government take immediate measures in tackling any abnormal market activities.

She also proposed to the Hong Kong Monetary Authority to further enhance the transparency of local banks' financial status in order to clear up doubts.

Meanwhile, to restore the public's confidence in the economy, Lee suggested the government develop more areas for economic growth. For example, the government can develop Sha Tau Kok into a tourist attraction.

"The government should take the policy address as an opportunity to restore the public's confidence in the economy," Lee said.

(HK Edition 10/07/2008 page1)