May 11, 2018 / 10:11 AM / a year ago

UPDATE 1-Hong Kong grows at best pace since 2011 in Q1, aided by consumption

* Q1 GDP +4.7 pct y/y, +2.2 pct q/q

* Govt maintains 2018 GDP forecast of 3-4 pct

* U.S.-China trade tensions of ‘particular concern’ - HK govt

* Growth has likely peaked in Q1 - economic consultancy

By Twinnie Siu and Donny Kwok

HONG KONG, May 11 (Reuters) - Hong Kong’s trade-reliant economy grew at the fastest pace in nearly seven years in the first quarter, on the back of strong exports and consumption.

The government said on Friday that annual growth in January-March surged to 4.7 percent, compared with 3.4 percent in 2017’s last quarter. The last period with faster growth was April-June 2011.

Growth was “unexpectedly strong and way above the high-end range of the street view of close to 4 percent,” Thomas Shik, Hang Seng Bank’s chief economist, said.

Andrew Au, a Hong Kong government economist, said he believes the global economy’s broad-based momentum is likely to continue in 2018 as China’s economy “should stay on a robust growth track” following its good first quarter.

But Capital Economics said it thinks Hong Kong growth has now peaked “and will slow over the coming months as headwinds from tightening monetary conditions build”.

The Hong Kong government kept its forecast for full-year 2018 growth at 3-4 percent.

In January-March, exports of goods increased 5.2 percent from a year earlier, with notable pick-ups in shipments to major markets including China, the U.S. and the European Union, the government said.

While recent trade tensions between the United States and China weren’t reflected in first quarter numbers, the government said it has “particular concern” about them, for the potentially adverse impact on trade flows and investor sentiment.

On a quarterly basis, GDP in January-March expanded 2.2 percent from the previous period, the fastest such growth in seven years. In October-December, the economy grew 0.8 percent from the prior quarter.

The Hong Kong government said domestic demand should continue to be resilient, while local consumption sentiment would be “underpinned by favourable job and income conditions”.

Shik of Hang Seng Bank said a strong stock market and unemployment of below 3 percent “gave a boost to people’s consumption and spending sentiment”.

Growth in Hong Kong is highly reliant on capital, trade, tourist and investment flows from China. A surge in domestic spending, a rise in mainland visitors and improved retail spending helped ramp up gross domestic product last year after a difficult 2016.

Hong Kong’s annual inflation rate in the first quarter was 2.4 percent. The government said there may be some upward pressure on inflation if current robust economic conditions continue.

Reporting by Donny Kwok and Twinnie Siu; Writing by James Pomfret; Editing by Richard Borsuk

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