Hong Kong retail sales suffered their worst annual decline last year since 2002, battered by a fall in big spending tourists from the mainland and weak consumer spending.
Retail sales in December slid 8.5% from a year earlier to HK$43.7 billion ($5.62 billion) in value terms, the biggest percentage decline since January 2015. In volume terms, December sales fell 6.1%, Reuters reported.
For the whole of 2015, the value of retail sales fell for the second year—down 3.7% to HK$475.2 billion—in the biggest decline since 2002 when they dropped 4.1%. Total volume slid 0.3%.
“Apart from the continued slowdown in inbound tourism, the uncertain economic outlook and asset market corrections may also have dented local consumption sentiment,” the government said in a statement.
Hong Kong is bracing for greater economic challenges as the prospect of interest rate rises drives fears of capital outflows that could pressure the Asian financial hub at a time when China’s economy is growing at its slowest pace in 25 years.
“Looking ahead, the near-term outlook for retail sales will still be constrained by the weak performance of inbound tourism,” the government said, adding it would watch closely the impact from dimmer global economic prospects amid US interest rate normalization.
Expensive Destination
The strong Hong Kong dollar, which is pegged to the US dollar, has made the city an expensive destination and China’s cash-rich tourists are heading for more exotic destinations.
Hong Kong tourist arrivals fell 2.5% in 2015 to 59.32 million, the first decline since 2003 when the city introduced an individual visitor scheme that lifted travel restrictions for some mainland Chinese. Mainland visitors account for about three quarters of visitors.
Hong Kong’s comparatively high rents and wages also hurt companies as fewer mainland tourists have come to the city to buy handbags, watches and designer clothing.
December sales of jewelry, watches, clocks and valuable gifts in value terms fell 17%, a 16th consecutive month of decline.
“The luxury goods companies are left in a difficult situation as they have invested heavily in sizeable and expensive retail networks in Hong Kong,” said Anthea Arff-Pettersen, analyst, European & UK equities, at Schroder Investment. “Most companies have seen their profit margins weaken significantly as footfall in their Hong Kong stores is down by double digits.”
Department store sales slid 12.3% on year, against a 4.8% drop the previous month, while clothing and footwear fell 11.6%, against an 8.7% decline in November.
