Hong Kong’s retail sales likely contracted in March (CORRECTED)

Correction: It is China (not Hong Kong) introduced an “import consumption tax” at the start of April, which is expected to impact the HongKong’s luxury retailers.

Hong Kong will be publishing its March retail sales data on 5 May. The country’s retail sales volumes and values are likely to have shrunk in March, according to DBS Bank. Retail sales are expected to have contracted 11.5% y/y as compared with 13.6% contraction in January-February, while retail volumes likely contracted 9% as compared with contraction of 12.4% in January-February, noted DBS Bank. The deceleration is worsened by outbound tourism in Easter period that took place in March this year.

Retail sales are expected to continue shrinking in the following months, noted DBS Bank. The deceleration in tourist arrivals is intensifying. During January-February, visitors from China travelling under the Individual Visitor Scheme dropped 26.7% y/y as compared with drop of 21.6% in Q4 2015 and decline of 16.6% in Q3 2015. The semi-permanent nature of drop is the main concern, said DBS Bank. Correction: It is China (not Hong Kong) introduced an “import consumption tax” in the start of April, which is expected to impact the HongKong’s luxury retailers.

Meanwhile, consumer sentiment of the country is fading due to the financial market turmoil and property market correction. There are increased worries of imminent layoffs. The Productivity Council’s recent study shows that 27.8% of surveyed retail firms will shut down in one year if operating conditions worsen in the coming year, noted DBS Bank.