The Hong Kong economy grew modestly in the third quarter of 2012, by 1.3 percent over a year earlier, similar to the 1.2 percent pace in the second quarter, according to the Third Quarter Economic Report 2012 released by Hong Kong Government Friday.
On a seasonally adjusted quarter-to-quarter comparison, the economy resumed growth at 0.6 percent in the third quarter, after a marginal decline of 0.1 percent in the preceding quarter.
External demand remained subdued in the face of the recession-ridden eurozone, slow-growing U.S. economy, and the ensuing set-back in Asian production and trade flows. Yet helped partly by a low base of comparison a year earlier, total exports of goods still had a moderate year-on-year growth at 4 percent in real terms in the third quarter, though with widespread weaknesses still evident across the EU, the U.S. and many major Asian markets. Exports of services slowed visibly to only a meager 0.1 percent year-on-year growth over the same period.
Domestically, thanks to largely sanguine job and income conditions, private consumption expenditure grew steadily further by 2.8 percent in real terms in the third quarter over a year earlier. Meanwhile, investment spending picked up to a strong 8.7 percent growth, on the back of robust private machinery and equipment acquisition, intensive large-scale infrastructure works, as well as a further surge in private sector building activity.
The labor market held largely stable in the third quarter, though with signs of slowdown in total employment emerging towards the end of the quarter, causing the seasonally adjusted unemployment rate to edge up to 3.3 percent. In the third quarter, the median employment earnings rose by 8.3 percent in nominal terms over a year earlier, representing an increase of 5.1 percent in real terms after discounting inflation.
Over the same period, average employment earnings for the lowest decile of full-time employees rose appreciably further by 7.2 percent in nominal terms, or 5.2 percent in real terms.
On the external front, while there has been some stabilization of the eurozone sovereign debt crisis following the recent policy actions by the European authorities, economic growth and sentiments in Europe have remained subdued. In the United States, recent economic data have been more positive, though with the outlook still overcast by the looming fiscal cliff. Against this background, Hong Kong's trading environment is still subject to a high degree of uncertainty.
Nevertheless, activity in Chinese Mainland economy has shown signs of re-acceleration in the more recent months, which should lend support to intra-regional trade going forward.
The latest Quarterly Business Tendency Survey indicated that the trade-related sectors remained generally cautious towards the near-term business outlook, yet sentiments in the domestic-related sectors were somewhat more upbeat. Domestically, consumption demand is expected to stay steady under the support of higher incomes over the past year. Also, large-scale infrastructure works and private building activity should continue apace, thereby rendering continued momentum to domestic demand.
Hong Kong Government Economist Helen Chan said that having regard to the outturn of a subdued 1 percent year-on-year real GDP growth in the first three quarters of 2012, and in cognizance of possibly some relative improvement in the fourth quarter, the GDP growth forecast for 2012 is slightly revised to 1.2 percent, from the earlier range forecast of 1 percent to 2 percent in the August round.
Chan noted that underlying consumer price inflation tapered successively from 5.9 percent in the first quarter to 4 percent in the third quarter, thanks to receding domestic and external price pressures.
In Chan's view, the more moderate increases in import prices in recent months should help to keep inflation largely contained in the rest of the year. However, with the rebound of global food prices in July and August following the drought in the U.S., the new round of quantitative easing in the advanced economies, and the renewed pick-up in local housing rentals in the past few months, the pace of tapering in Consumer Price Index (CPI) inflation in the months ahead is expected to be slower than earlier envisaged.
Chan said that judging from the actual outturn so far and the latest developments, the forecast rates of headline and underlying consumer price inflation for 2012 as a whole are slightly revised upwards to 3.9 percent and 4.5 percent respectively, from 3.7 percent and 4.3 percent in the August round.