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Hong Kong’s retail sales grew at the slowest pace since July, with the government warning of further pressure ahead amid a surge in Covid cases.
The value of retail sales grew 4.1% in January from a year earlier, compared with the median estimate of 0.4% in a Bloomberg survey of economists. The volume of sales rose 1.7%.
The Lunar New Year — which fell on Feb. 1 this year — typically helps to boost retail spending, the Census and Statistics Department said in a statement. The data covers consumer spending on goods but not on services, such as those on catering and medical care and entertainment, which account for over 50% of overall consumer spending.
“The figure has yet to fully reflect the impact of the fifth wave of local epidemic and the further tightening of anti-epidemic measures in the more recent period,” a government spokesperson said in the release. “The retail sector will remain under immense pressure in the near term.”
GDP to Shrink
Those comments were echoed by Annie Yau Tse, chairman of the Hong Kong Retail Management Association, who told reporters on Friday that the outlook remains dim for February and March after more stringent social distancing measures were rolled out and the government prepares for mass virus testing and a possible lockdown.
The report is the latest indication of economic pressure facing the Asian financial hub. Data on Thursday showed economic activity contracted in February, plunging to a 22-month low. Economists are already predicting the economy shrank in the first quarter.
In a bid to boost retail sales, Financial Secretary Paul Chan pledged in his budget to give residents another HK$10,000 ($1,279) of consumption vouchers this year. Previous handouts last year helped to boost monthly retail sales by double digits.
The current outbreak has already caused substantial damage to the retail sector. A major drug retailer said this week it will close 53 stores across Hong Kong due to the pandemic situation and an online retailer said it’s struggling to fulfill orders as 20% of its staff are in quarantine. Nightlife mogul Allan Zeman said the government needs to include the business sector in its Covid-decision making process.
A survey among 3,600 shops found sales in the last week of February fell as much as 60% for companies selling non-essential goods from the level in the first week, said Yau Tse. Most of the shops have had to cut operation hours or temporarily shut due to increasing number of staff getting infected and dwindling foot traffic, she said.
“This outbreak is the worst that Hong Kong has ever faced,” said Yau Tse. “Due to the impact, the domestic market will definitely take much longer to recover, and there will be a lot more challenges on the path to recovery.”
(Updates with comments from retail association.)
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