Hang Seng Bank has revised down the 2008 and 2009 Hong Kong retail sales volume growth forecast to 4.8 percent and 1.3 percent due to weakening consumer spending triggered by economic slowdown.

Initially, the bank's forecast on the two years' retail sales volume growth was 6 percent and 2 percent. However, it has revised down the figures because both domestic demand and demand by tourists have created a pessimistic outlook for retail sales growth.

"We expect growth in the fourth quarter this year will be -3 percent. There will be negative growth for the first two quarters next year as well. It may look brighter in the second half of 2009 if government policies in bolstering infrastructure have taken effect in providing jobs and keeping unemployment rate in control or even lower," Irina Fan, senior economist at Hang Seng Bank said.

While the local economy is no longer threatened by inflation, there are concerns over growth and employment opportunities in the territory. Following the slowdown in exports, trading companies and factories targeting overseas markets may have difficulties in business and may have to layoff more employees, she added.

Hong Kong's economic monitors show consumer spending has been sluggish for months.

Retail sales volume grew merely 1.8 percent in September, after rising 3.7 percent in the previous month. The outlook is more pessimistic, as the unemployment rate has shown a rising trend.

"Local consumer expenditure will decrease because people have lost money in the stock and property markets and also they may lose their jobs when companies go bankrupt," Fan said.

The unemployment rate rose 0.2 percentage points to 3.4 percent in September, 2008.

Layoffs and job cuts are likely to surge with possible corporate bankruptcies in Hong Kong and this, in return, will hit consumer income and spending.

Fan thinks the current economic condition is unlikely to improve in near-term.

The economist forecasts that Hong Kong's real gross domestic product will grow merely 4 percent and 2 percent for this year and the next.

The adverse impacts of the financial tsunami on the real sectors are just starting to unfold, Fan added.

(HK Edition 11/07/2008 page2)