PREVIEW-HK Jan retail sales seen up 18.5 pct yr/yr

* What: Hong Kong's January retail sales

* When: March 3 at 4.15 p.m. (0815 GMT)

* Sales seen up 18.5 percent from year earlier by value

By Susan Fenton

HONG KONG, Feb 29 (Reuters) - Hong Kong retail sales in
January probably rose 18.5 percent in January from a year
earlier, the fastest pace in two months, helped by a large drop
in interest rates, a Reuters survey shows.

Hong Kong is tied to U.S. monetary policy because its
currency is pegged to the U.S. dollar. In January it followed
two U.S. rate cuts within the space of just over a week, with
Hong Kong banks slashing prime lending rates by a total 100
basis points.

January retail sales would also have been buoyed late in
the month by spending in preparation for the Lunar New Year
holiday festivities in early February, economists said.

Consumer spending has been robust in the past year,
bolstered by falling unemployment and wage growth as the
economy has averaged more than 7 percent growth annually for
the past four years.

Unemployment at 3.4 percent is near a 10-year low, making
people feel more secure in their jobs and therefore more
willing to spend, economists say.

However, economic growth is set to slow this year as it
feels the impact of a weakening U.S. economy.

The government forecasts economic growth of between 4 and 5
percent this year, down from 6.3 percent in 2007.

"Consumer confidence will remain high in the first half.
But it will drop in the second half because I think the
unemployment rate will edge up as companies in the trade sector
are affected by the U.S. downturn," said Paul Tang, senior
economist at Bank of East Asia.

A generous package of tax concessions and handouts,
including a one-off cut in income tax this year, announced in
the government's annual budget this week should underpin
consumer confidence in coming months.

Retail sales have surged since last spring, growing at
double-digit annual rates. In December, sales growth slowed for
the first time since last March.

The survey forecast January sales volume would be 13.1
percent higher than a year earlier.

Forecasts for January retail sales by value and volume
(percentage change from a year earlier):

Value Volume
Standard Chartered Bk 22.2 n/a
Citigroup 21.0 16.5
DBS Bank 19.5 15.0
ING Financial Mkts 19.5 16.0
HSBC 17.5 13.1
Hang Seng Bank 17.4 13.0
Bank of East Asia 16.0 12.0
Lehman Brothers 15.1 n/a
UBS n/a 12.2
----------------------------------------------
Median 18.5 13.1
(US$=HK$7.8)
(Editing by Neil Fullick)