A shopping center in Hong Kong offers a special "one-HK dollar" Christmas gift to its customers. A Nielsen survey showed Hong Kong suffered one of the sharpest declines in consumer confidence in the world between the first and second half of this year. CNS

People of Hong Kong may have reined in their spending amid the deteriorating economy as the city's retail sales volume in October fell 4.3 percent. And the market condition is likely to remain difficult in the coming months, the government said yesterday.

The value of total retail sales rose to HK$20.8 billion in October, up 0.3 percent from the same period last year, the Census & Statistics Department (C&SD) said on its website.

"The situation will deteriorate further in the rest of the year; the jobless rate will increase and many people feel reluctant to spend," said Irina Fan, a senior economist at Hang Seng Bank.

The bank predicts the retail sales volume growth rate will plunge to minus 5 percent in November and minus 8.5 percent in December, while the sales value growth rate in the two months will fall to minus 1 percent and minus 5 percent respectively.

"Even if the holiday season warms up the retail market a bit, the year-on-year growth will still be greatly eclipsed by last year's high sales record," Fan said.

She thinks the jobless rate in Hong Kong will fall to 5 percent in the middle of next year compared with the current unemployment rate of 3.5 percent, according to C&SD.

Taking the first 10 months of the year together, total retail sales grew 12.7 percent in value, or 6.4 percent in volume, year-on-year, the C&SD said.

Among the consumer products, motor vehicles and parts saw the weakest demand in October, falling nearly 24 percent in sales volume, followed by valuable goods like jewelry and timepieces.

However, the sales volume in electrical goods and photographic equipment increased by 6 percent, while sales of fuel and furniture soared over 4 percent.

Hong Kong's economy slipped into recession in the third quarter and is unlikely to rebound until the second half of next year, as its key trade and finance sectors have been hit by the global economic downturn.

Consumer confidence in October was also rocked by a highly volatile stock market and continued weakening of the property market. A drop in tourism compared with October last year would also have hurt sales as tourists account for 20 percent to 25 percent of retail sales, analysts say.

A survey conducted by the Nielsen Company, a leading market information provider, released last month showed Hong Kong suffered one of the sharpest declines in consumer confidence in the world between the first and second half of this year.

(HK Edition 12/02/2008 page2)