Sales of luxury goods for March down 20% as tourism slump bites

Hong Kong retailers are feeling the pinch as sluggish inbound tourism bears down on hard-pressed shopkeepers, with retail sales falling in the first quarter of this year, and economists seeing no relief until winter.

The SAR's value of total retail sales in March slipped 2.9 percent from the same month last year. In the first quarter of this year, total retail sales declined by 2.3 percent in value, compared with the same period in 2014.

The main culprit was a near 20 percent year-on-year fall in sales of jewelry, watches and clocks, and valuable gifts. It's a sign that sales of luxury goods - the mainstay of the city's retail industry - have been hard hit as tourist arrivals slumped.

A government spokesman noted that the performance of retail sales remained sluggish in March with most types of retail outlets recording year-on-year declines in sales, conceivably reflecting the slowdown in inbound tourism.

Paul Tang Sai-on, chief economist at the Bank of East Asia, said the warning bell had been sounded for the retail sector, with recent data showing that Hong Kong's decade-long boom in the retail industry - driven by fervent demand from mainland visitors - may be coming to an end with a thud.

Hong Kong tourist arrivals in March registered a year-on-year decline of 8.7 percent, marking the first monthly drop since June 2009. The number of mainland visitors fell by 10 percent, according to data from the Hong Kong Tourism Board.

Comparing tourist arrival figures this year for the Ching Ming Festival and the subsequent two days to the equivalent period last year, the overall number of tourists had dropped by 12.4 percent. The decrease in mainland visitor arrivals was a larger 14 percent, Financial Secretary John Tsang Chun-wah said.

According to the Travel Industry Council of Hong Kong, the registration of mainland travel groups in March posted a staggering year-on-year plunge of 41.9 percent. Registration in the first three months of this year saw a drop of 21.1 percent, compared with the corresponding period in 2014.

"The retail sales performance in the near term is likely to be constrained by the weaker performance of inbound tourism, although stable labor market conditions should still render support to local consumer sentiment," the government spokesman said.

The declines have sparked concern that the city's retail industry has been too reliant on mainland tourists.

"In the past few years, the city's retail sector has become too dependent on inbound tourism, largely on mainland visitors," noted Standard Chartered Hong Kong senior economist Kelvin Lau Kin-heng. He went on to say that the downward trend may force local retailers to focus more on the potential of local consumers and develop a healthier growth model.

"With the support from the exports sector, we may expect a better retail performance in the second half of the year," said Tang. "Still, the recent data indicates the city's retail industry, which is very likely to post a negative growth for the whole year, is on a downward trajectory."

sophia@chinadailyhk.com

The city's retail sector may edge into a whole-year contraction this year, analysts warn. Billy H.C. Kwok / Bloomberg

(HK Edition 05/06/2015 page9)