August 30, 2018 / 11:23 AM / 25 days ago

Hong Kong posts slower retail sales growth, outlook clouded by trade spat

HONG KONG (Reuters) - Hong Kong’s retail sales grew at a slower pace in July after five straight months of double-digit gains, government data showed on Thursday, with the outlook overshadowed by concern over China-U.S. trade tensions.

FILE PHOTO: People walk at the shopping Mongkok district in Hong Kong, China, September 15, 2017. REUTERS/Bobby Yip/File Photo

July retail sales rose 7.8 percent from a year earlier in value terms to HK$38.9 billion ($4.96 billion), slower than a revised 11.9 percent rise in June, but still marking their 18th month of expansion.

In volume terms, retail sales grew 5.9 percent, slower than 9.8 percent growth in June.

For the first seven months of 2018, total retail sales rose 12.6 percent in value terms and 11.0 percent in volume terms.

“The significant pace of slowdown reflects a high base last year and it also reflects that we have started to see the psychological effects of the Sino-U.S. trade dispute,” said Thomson Cheng, Chairman of the Hong Kong Retail Management Association.

A depreciating yuan also made the Hong Kong dollar more expensive, Cheng said on a conference call.

“Uncertainty is still here as the negative impact due to the trade dispute will not go away any time soon,” he added.

Cheng said he expected sales growth in August to remain in single digits, and forecast second-half growth of 6-7 percent.

Hong Kong’s retail sales are strong despite slowing economic growth after a solid start to the year. Some analysts expect growth to slow further as trade tensions between Beijing and Washington and higher interest rates start to bite.

China’s investment growth slowed to a record low in the first seven months of 2018, while retail sales softened as consumers grew more reluctant to spend.

Meanwhile, analysts are optimistic that tourist arrivals from mainland China will remain strong over the longterm.

Supporting that view is the launch of a high-speed rail link in September, and a highway expected later this year, to connect the city to the neighboring Chinese province of Guangdong.

The Hong Kong Tourism Board was expected to release data for the city’s July tourist arrivals this week.

Global consulting company PwC in June revised its 2018 outlook for Hong Kong’s retail sales growth to 8 percent, up from a previous 4-6 percent.

Sales of jewelry, watches, clocks and valuable gifts, jumped 16.8 percent in July, slowing from 27.8 percent growth in the previous month, government data showed.

Growth in medicines and cosmetics slowed to 12.7 percent from 18.0 percent in June, while department store sales were up 8.6 percent compared with 15.0 percent growth in June.

($1 = 7.8490 Hong Kong dollars)

Reporting by Twinnie Siu and Donny Kwok; Editing by Darren Schuettler

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