Inflation, Fewer Exports Threaten Consumer Boom
[引用 2008-03-16 20:13:30]
Worries that inflation and weakening exports could depress consumption in Hong Kong this year are causing some economists to question whether the local economy, driven by trade and services, can continue to ride the mainland's boom.
Underlying inflation is at 4.3 percent - its highest in nearly 10 years - spurred by rises in import prices, housing rents and food costs. Analysts say it is heading toward 5 percent, which could crimp household spending just as the economy is relying on consumption to offset weakening exports.
"The risk is that in the coming quarters, consumption growth will weaken due to higher prices coming through and because an export downturn will affect Hong Kong, and firms will have to scale back hiring," said Rob Subbaraman, an economist with Lehman Brothers' Asia.
For now, consumption remains robust.
Real interest rates are negative and wages are strong, while the stock market's 39 percent rise last year created a wealth effect. Private consumption rose 10 percent in the fourth quarter from a year earlier, driving a 6.7 percent rise in the gross domestic product.
But the stock market has fallen 20 percent so far this year and export growth is weakening as shipments to the United States, the biggest market after the mainland, have fallen in recent months.
The government and many economists believe Hong Kong's links with the mainland's economy will provide a cushion. They forecast growth in Hong Kong of 4 to 5 percent this year - down from an average of 7.2 percent in the past four years, but decent nonetheless. But not everyone is so optimistic.
Sean Yokota, an economist at UBS, forecasts a mere 2.5 percent growth this year, even though he expects the US recession woes to be over by the second half.
The Chinese mainland will provide a cushion, yes. But an export slowdown will filter through and derail consumption and investment," Yokota said.
He estimates that earnings from exports equal 32 percent of the gross domestic product (GDP). The value of exports is more than 200 percent of the GDP but they are mostly re-exports. And the trade sector accounts for 15-20 percent of total employment.
Underlying inflation is at 4.3 percent - its highest in nearly 10 years - spurred by rises in import prices, housing rents and food costs. Analysts say it is heading toward 5 percent, which could crimp household spending just as the economy is relying on consumption to offset weakening exports.
"The risk is that in the coming quarters, consumption growth will weaken due to higher prices coming through and because an export downturn will affect Hong Kong, and firms will have to scale back hiring," said Rob Subbaraman, an economist with Lehman Brothers' Asia.
For now, consumption remains robust.
Real interest rates are negative and wages are strong, while the stock market's 39 percent rise last year created a wealth effect. Private consumption rose 10 percent in the fourth quarter from a year earlier, driving a 6.7 percent rise in the gross domestic product.
But the stock market has fallen 20 percent so far this year and export growth is weakening as shipments to the United States, the biggest market after the mainland, have fallen in recent months.
The government and many economists believe Hong Kong's links with the mainland's economy will provide a cushion. They forecast growth in Hong Kong of 4 to 5 percent this year - down from an average of 7.2 percent in the past four years, but decent nonetheless. But not everyone is so optimistic.
Sean Yokota, an economist at UBS, forecasts a mere 2.5 percent growth this year, even though he expects the US recession woes to be over by the second half.
The Chinese mainland will provide a cushion, yes. But an export slowdown will filter through and derail consumption and investment," Yokota said.
He estimates that earnings from exports equal 32 percent of the gross domestic product (GDP). The value of exports is more than 200 percent of the GDP but they are mostly re-exports. And the trade sector accounts for 15-20 percent of total employment.
分类: HongKong
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