Tourists take selfies at the Peak in Hong Kong, China August 4, 2017. (Reuters Photo/Bobby Yip)

Hong Kong Raises 2017 Growth Outlook After Solid Q2


AUGUST 12, 2017

Hong Kong. Hong Kong raised its growth outlook for 2017 after a surprisingly strong performance in the second quarter helped by a pick-up in consumption and buoyant stock and property markets.

Second quarter growth was also underpinned by a moderate expansion in the global economy and strong growth on the mainland, although the government warned of headwinds from rising US interest rates and geopolitical tensions.

It revised the full-year estimate for 2017 economic growth to 3-4 percent from 2-3 percent.

"External demand improved further in the second quarter, with downside risks to the global economic outlook receding. This continued to render support to Asia's regional trading and manufacturing activities," the government said in a statement.

The economy grew a seasonally-adjusted 1.0 percent in the second quarter, compared with 0.7 percent growth in the January quarter. Three analysts surveyed by Reuters had an average estimate of 0.8 percent.

From a year earlier, the economy expanded 3.8 percent in the second quarter compared with 4.3 percent in the previous quarter, which was its fastest annual pace in six years.

The average estimate of six analysts surveyed by Reuters had forecast average growth of 3.48 percent in the April-June quarter from a year earlier.

"Local demand was still the engine behind the growth with the help from rising retail sales and personal spending, while growth in exports and imports also aided the (GDP) growth," said Thomas Shik, acting chief economist of Hang Seng Bank.

Hong Kong's long-term regional rival Singapore on Friday reported economic growth of 2.2 percent for the April-June quarter, with a rebound in services suggesting a broader and more balanced recovery after a stumble early in the year.

The former British colony's private consumption expenditure grew 5.3 percent in real terms in the second quarter from a year earlier, underpinned by favorable labor market conditions and stronger wealth effects.

Record high property prices, in spite of a series of tightening measures, and a strong stock market have contributed to making Hong Kong residents feel more wealthy and in turn boosted consumer sentiment.

The strong start to the year bodes well for Hong Kong's new leader, Carrie Lam, although she still faces the daunting task of reining in sky-high home prices which have triggered protests in recent years amid calls for more affordable housing.

Hong Kong's benchmark index closed down 2 percent ahead of the data, capping a turbulent week in financial markets in the wake of ramped up tensions between the United States and North Korea.

Hong Kong had been grappling with weaker retail sales and a slump in cash-rich mainland Chinese streaming across the border on shopping sprees, but retail sales in June rose for the fourth straight month after two years of decline, while the drag from tourism receded.

Total exports of goods grew 5.6 percent on year in real terms in the second quarter, with exports to Asian markets providing the main growth impetus, the government said on Friday (11/08).

Other indicators also show the city is holding up well. The private sector grew at its fastest rate in nearly 3-1/2 years in July, driven by stronger output and new orders, an industry survey showed.

Hong Kong's June exports also rose 11.1 percent on year, marking the fifth consecutive month of growth.