A couple look at gold rings in the window of a jewelry store in Hong Kong. Sales of luxury goods including jewelry and watches grew 37 percent in July. Jerome Favre / Bloomberg

Volume jumps on strong economic growth and rising tourist numbers

Hong Kong's retail sales soared 29.1 percent in July from a year ago as an improving economy and increase in the number of tourist arrivals bolstered local spending.

The value of total retail sales expanded to HK$35.2 billion in July after a revised 28.8 percent increase in June. After taking out the inflationary effect, retail sales by volume jumped 22.4 percent from a year ago.

"Retail sales expanded strongly further in July, thanks to buoyant local consumption demand and tourist spending," a government spokesman said in a statement on Monday.

The spokesman also noted that local consumer sentiment should remain largely positive in the coming months, buoyed by improving income conditions.

The city's labor market, which has remained tight so far this year, is causing upward pressure on wages. At 3.4 percent, the jobless rate for the May-July period was one percentage point lower than the April-June period.

Supporting the vigorous retail business sales was the increase in the number of visitor arrivals in Hong Kong, which hit a new record high of 3.84 million in July - 22.4 percent more than the previous year. About 2.67 million were from the mainland, up 33.1 percent from the same month in 2010.

Riding on rising incomes and increasing inflows of tourists, most of the city's retail businesses recorded double-digit growth. The sales volume of consumer durable goods gained the most, by 84.6 percent, followed by sales of electrical goods and photographic equipment, which expanded at 73.3 percent. Sales of luxury goods including jewelry and watches grew 37 percent.

Caroline Mak, chairman of the Hong Kong Retail Management Association, expects retail businesses to continue increasing hiring to meet the growing demand.

But she cautioned against the effects of mounting inflationary pressure, which may dampen retail sales volume in the months ahead.

Despite gaining 7 percent in value, the sales volume of food, alcoholic drinks and tobacco dropped 6 percent in July after declining 10.4 percent in June.

"The wage increases have been outpaced by food inflation," Mak told reporters in a conference call Monday, adding that she expected the negative growth in food sales volume to continue throughout the remainder of this year due to soaring prices.

Hong Kong's headline inflation surged 7.9 percent year-on-year in July. Stripping out the effect of the government's one-off relief measure, underlying inflation rose 5.8 percent, compared with 5.5 percent in June. Prices for food excluding meals bought away from home added 10.7 percent.

The costs of running business are also being pushed up, Mak warned. "Most of the retailers recorded a rent increase on their outlets by 20 to 50 percent with a few even facing 100 percent increases," she said. As a result, retail prices have been raised to compensate for the rising costs.

emmaan@chinadailyhk.com

China Daily

(HK Edition 08/30/2011 page2)