HK's Q3 GDP suggests bottoming out of slowdown

According to the statistics, external demand remained subdued in the face of the recession-ridden eurozone, slow-growing US 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 US 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.