Hong Kong’s retail sales shrank at a slower pace in March after the effects of the Chinese New Year waned; however, it continues to be at a weak level. Retail sales values contracted 9.8% y/y in March, as compared with February’s contraction of 20.6% y/y. Consumer durable goods sector and luxury goods sector continued to contract due to an 11% year to date contraction in inbound tourists. In terms of volume, retail sales dropped 11.3% year-to-date. However, certain categories performed better than the others.
But the continuous fall in the total tourists coming to Hong Kong, particularly from Mainland China, are likely to be downside risks to the overall performance of retail sales in the near term, according to HSBC. Even if the reduction in the arrivals of tourist eased in March, the total arrivals contracted 10.9% YTD y/y.
Moreover, the Hong Kong dollar’s strength, because of its peg with the USD, is also expected to have lowered the tourists’ purchasing power, said HSBC. Hong Kong’s retail sector is expected to face continuous headwinds from the weakness in incoming tourists in the near-term at least, added HSBC.
