HK's Q3 GDP suggests bottoming out of slowdown

HONG KONG - 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-on-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.

Ryan Lam and Joanne Yim, economist and chief economist of Heng Seng Bank, said that the advance release of Hong Kong's Q3 GDP suggests a bottoming out of the slowdown, although the economy continued to grow at a below-trend pace.

Lam and Yim said that encouragingly, the recovery was not due to base effects. The city resumed quarter-on-quarter expansion of 0.6 percent after shrinking 0.1 percent in the preceding quarter. That confirms our long-held view that the economy has seen its bottom of this cycle in the first quarter.

"The solid Q3 economic growth and upbeat October data lead us to become increasingly convinced that a modest recovery is underway," Yim said. "There remain, however, challenges ahead in the global economy. Our forecast continues to look for a moderate growth through the remainder of 2012 and 2013. We call for a full- year growth of around 1.5 percent this year and penciled in a 3 percent growth in 2013."

Donna Kwok, HSBC's Greater China economist, said that despite continued troubles in Europe and China's slow pace of recovery, Hong Kong battled through the third quarter and came out stronger for it. Domestic demand stayed buoyant, supported by continued wage growth and a resilient job market. With China's economy now past its bottom, we expect Mainland demand to further cement Hong Kong's ability to expand by 2 percent year-on-year this year and 5. 2 percent in 2013.