SCMP Thursday, November 8, 2001
Retail sales plunge worse than feared
Retail sales in Hong Kong fell 4.4 per cent by value in September compared with a year ago in the wake of rising unemployment and plunging consumer confidence, according to government figures.
The figures released yesterday were worse than economists had feared. They highlight the tough times being faced by retailers as the economy slows down.
They prompted the economists to suggest things would get worse before they get better, and one to say that the SAR was "in all likelihood" slipping into recession.
The figures also showed that after discounting the effects of price declines during the period, sales were down 1.7 per cent in volume terms, reversing a 1.8 per cent gain in August.
A drop in sales of big ticket and luxury goods and a fall in tourist numbers in the wake of the September 11 terrorist attacks in the United States were among the main reasons for the decline, the figures indicated.
"While local consumer spending was held back amid the rise in unemployment, tourist spending also went down as visitor arrivals shrank in the wake of the 911 [September 11] incident," the government said. "In particular, sales of motor vehicles, which had registered strong growth in the past year or so, reversed to a significant decline in September."
Sales of motor vehicles and parts declined 13.4 per cent in volume terms.
Sales of luxury goods such as jewellery and watches fell, as did clothing and footwear sales.
Food sales were up, which the Government said probably reflected the difference in timing of the Mid-Autumn festival holiday between last year and this year.
George Leung Siu-kay, chief economist at HSBC Holdings, who had estimated a fall of only 1 per cent in retail sales in September, said the sharp fall showed consumer confidence was weakening fast.
Compared with August, sales of items such as consumer durable goods and clothing, which are dependent on domestic demand, fell 0.86 per cent and 15.93 per cent respectively in volume terms.
The figures will add to the gloom surrounding the health of the SAR's economy.
Hong Kong's economy grew just 0.5 per cent in the second quarter year on year and is widely expected to contract 0.3 per cent this year as demand from its second-largest trade partner, the US, wanes in the wake of the September attacks.
Unemployment is at a 17-month high of 5.3 per cent and is expected to breach 5.5 per cent by year end.
With job situations so precarious, few people are in the mood to spend.
"In all likelihood Hong Kong is slipping into recession," Mr Leung said.
Considering the poor retail sales, as well as poor import and export figures, he estimated a minus 2 per cent growth in the third quarter, and "an even worse one" in the fourth quarter.
A recession occurs when an economy records negative growth in its gross domestic product for two consecutive quarters.
Pessimism due to the impact of the September 11 terrorist attacks had still to be fully reflected, Mr Leung said.
However, retailers said the impact of the tragedy had already reflected on their businesses.
Philip Ma King-huen, managing director of department store Sincere, said yesterday the family-controlled store had seen a decline of as much as 30 per cent in sales since the United States attacks.
A similar sales drop had also been seen at fashion retailer Gay Giano International.
Chairman Simon Cheung said sales had decreased more than 10 per cent since the terrorist attacks.
To push sales, the middle- to high-end fashion retailer started a 50 per cent-off promotional sale last month.
Given the adverse sentiment, Roger King, chief executive of cosmetic retailer Sa Sa International, said he saw more consumers turning to cheaper brands to save money.
Despite a 10 per cent sales drop immediately after September 11, the discount seller saw a quick recovery to its pre-attack levels.