Hong Kong's Economy Grew Slower Than Expected in First Quarter

(Bloomberg) -- Hong Kong's economy expanded at the weakest pace since the aftermath of the global financial crisis a decade ago, as a fragile global outlook and the U.S.-China trade war dampened activity.

First-quarter gross domestic product grew 0.5 percent compared with a year ago, after a revised expansion of 1.2 percent in the final period of 2018, according to advance estimates in a government announcement. That was below all but one economist forecast. On the quarter though, growth surprised to the upside, accelerating to 1.2 percent.

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The data underline the impact that the trade standoff and the slowdown in China's economy has had on its neighbors, with the trade-dependent territory facing weaker exports and worse business sentiment. That said, signs that the mainland's performance has stabilized may buoy expectations, and sustained tourism receipts continue to provide support.

“Total exports of goods weakened further in the first quarter, similar to the situations in many other Asian economies,” according to the government statement. “The modest year-on-year growth in the first quarter also reflected the high base of comparison in the same quarter of last year.”

Hong Kong's economy is forecast to slow this year, to growth of between 2 percent and 3 percent, as the city grapples with trade tensions and weaker property values, Hong Kong Financial Secretary Paul Chan said in his latest budget unveiled in February.

Recent data have been mixed: March exports and imports fell less than expected while the trade deficit of HK$59.2 billion ($7.55 billion) was wider than forecast; February's retail sales figures miss was blamed on distortions due to the timing of the Lunar New Year Holiday.

Property prices are recovering after a 10 percent slide from August through January, with the Centaline Property Centa-City Leading Index rallying 7.8 percent on an 11-week streak since February.

The stock benchmark Hang Seng Index has struggled to stay above the psychological 30,000 level since returning to a bull market, as short sellers return.

“Despite the recovery in the stock and property markets, consumer spending has been cautious given global headwinds,” said Tommy Wu at Oxford Economics Ltd in Hong Kong. That's “reflected in soft retail sales performance in recent months which was dragged by domestic demand despite a recovery in inbound tourism.”

The U.S. and China are still closing in on a trade deal, with Chinese Vice Premier Liu He due to fly to Washington for further talks next week.

The government's statistics department said that from this quarter gross domestic product data will be released as an advance estimate, with a revised reading to follow along with economic forecasts. The revised estimate for the first quarter is due on May 17.

--With assistance from Enda Curran.

To contact the reporter on this story: Eric Lam in Hong Kong at elam87@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, Fion Li

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