Financial Capsule

Unemployment and Underemployment Rates Decline

Hong Kong’s labour market situation has continued to improve, with May – July 2004 figures showing the unemployment rate dropping to a 30-month record low and total employment soaring to another record high of 3,294,000.

According to the Hong Kong Census and Statistics Department, the seasonally adjusted unemployment rate declined slightly from 6.9% in May - July 2004 to 6.8% (provisional) in June - August 2004. The underemployment rate fell from 3.5% to 3.3% (provisional) between the two periods.

Comparing June - August 2004 with May - July 2004, decreases in the unemployment rate (not seasonally adjusted) were mainly observed in the retail trade, restaurants, business services and welfare and community services sectors, while increases were seen in the insurance and amusement and recreational services sectors. As to the underemployment rate, decreases were concentrated in the hotels, transport, communications, amusement and recreational services and education services sectors, more than offsetting the increase observed in the decoration and maintenance sector.

The Hong Kong Government has earmarked an average of HK$29 billion per year for capital works projects for the next five years, creating some 44,000 jobs annually. Ongoing capital projects include Route 8 and Stonecutter Bridge, improvements to the Tung Chung Road, and the new infectious disease centre attached to Princess Margaret Hospital, creating some 3,150 jobs.

Phenomenal Growth in GNP and External Factor Income Flows for Q2 

GNP exhibited a phenomenal growth in the second quarter of 2004, upon a strong upturn in overall economic activity and sustained net inflow of external factor income, although the year-on-year growth rate was partly magnified by an exceptionally low base of comparison caused by SARS last year. 

Hong Kong's GNP, estimated at HK$310.9 billion at current market prices, increased by 8.9% over a year earlier. The Gross Domestic Product (GDP), estimated at HK$309.2 billion at current market prices in the same quarter, recorded the same percentage increase during the period. Compared with GDP, the value of Hong Kong's GNP was larger by HK$1.7 billion in the second quarter of 2004. After netting out the effect of price changes, Hong Kong's GNP rose by 12.1% in real terms in the second quarter of 2004 over a year earlier.

Both the inflow and outflow of external factor income recorded double-digit growth in the quarter, along with increases in direct investment income and portfolio investment income inflows and outflows as global economic growth stayed strong, and the local economy rebounded. Also, flows of other investment income arrested the three-year downtrend and bounced back to positive growth upon more vibrant cross-border lending activity globally.

Total factor income inflow, estimated at HK$93.5 billion in the second quarter of 2004 and equivalent to 30.3% of GDP in that quarter, increased 23.5% over a year earlier. At the same time, total factor income outflow, estimated at $91.8 billion in the second quarter of 2004 and equivalent to 29.7% of GDP in that quarter, surged by 23.8% over a year earlier. Taking the inflow and outflow together, a net external factor income inflow of HK$1.7 billion was recorded in the second quarter of 2004.

The mainland of China was the largest source of Hong Kong's external factor income inflow in the second quarter of 2004, accounting for 24.2% of the total inflow in that quarter. This was followed closely by the British Virgin Islands, at 24.0%. Other major source countries/territories were the United States and the United Kingdom, at 10.3% and 6.3% respectively.

The British Virgin Islands and mainland of China were the most important destinations for Hong Kong's external factor income outflow in the period, accounting for 18.8% and 16.7% respectively of the total outflow in that quarter. Other major destination countries/territories included the United States, at 14.1%, Netherlands, at 9.7%, and the United Kingdom, at 9.2%.

Hong Kong's Latest Foreign Currency Reserve Assets Figures Released

The Hong Kong Monetary Authority (HKMA) has announced that the official foreign currency reserve assets of Hong Kong amounted to US$118.5 billion at the end of August 2004. Including unsettled forward contracts, the foreign currency reserve assets of Hong Kong at the end of August 2004 also stood at US$118.5 billion (end-July 2004: US$118.3 billion).

In terms of foreign currency reserves ranking, Hong Kong is the world’s fifth largest holder of foreign currency reserves, after Japan, Mainland China, Taiwan and Korea.

The total foreign currency reserve assets of US$118.5 billion represent over six times the currency in circulation or about 45% of Hong Kong dollar M3.

Port Registers Increased Activity

Total port cargo throughput increased in the second quarter of 2004 by 8% over a year earlier to 55.3 million tonnes. Within this total, inward port cargo increased by 10% to 34.6 million tonnes, while outward port cargo rose by 6% to 20.7 million tonnes.

For the first half of 2004, total port cargo throughput increased by 10% to 110.8 million tonnes. Within this total, inward and outward port cargo were up by 9% and 12% to 68.6 million tonnes and 42.2 million tonnes respectively.

On a seasonally adjusted quarter-to-quarter comparison, total port cargo throughput decreased by 8% in the second quarter of 2004. Within this total, inward port cargo decreased by 6%, while outward port cargo decreased by 10%. The seasonally adjusted series enables more meaningful shorter-term comparison to be made for discerning possible variations in trends.

Within port cargo, seaborne and river cargo went up by 10% and 4% over a year earlier to 40.3 million tonnes and 15.0 million tonnes respectively in the second quarter of 2004.

Comparing the second quarter of 2004 with the same period in 2003, double-digit increases were recorded in the tonnage of inward port cargo loaded in Australia (+92%), Singapore (+39%), Malaysia (+37%), the Republic of Korea (+20%) and the United States (+10%). Over the same period, substantial increases were registered in the tonnage of outward port cargo for discharge in Australia (+63%), the United States (+12%) and Vietnam (+12%). On the other hand, a double-digit decrease was recorded in the tonnage of outward port cargo discharged in Japan (-17%).


Retail Sales Surge in July 

Hong Kong’s retail sales volume recorded sustained solid growth in July 2004, notwithstanding the year-on-year base of comparison shifting higher as retail sales began to recover around July 2003. The further notable growth in July was supported by continued revival in local consumer demand and vibrant inbound tourism.

The value of total retail sales in July 2004, provisionally estimated at HK$16.2 billion, increased by 10.8% over a year earlier. After netting out the effect of price changes over the same period, the overall volume of retail sales increased by 8.0% in July 2004 over a year earlier.

Taking the first seven months of 2004 together, retail sales increased by 13.0% in value or 10.8% in volume as compared to the same period a year earlier.

Comparing July 2004 with a year earlier, sales of electrical goods and photographic equipment increased the most, by 22.1% in volume. This was followed by sales of motor vehicles and parts (by 22.0% in volume); furniture and fixtures (14.6%); commodities in department stores (12.8%); wearing apparel (10.4%); footwear, allied products and other clothing accessories (10.0%); miscellaneous consumer goods (7.3%); jewellery, watches and clocks, and valuable gifts (5.7%); and commodities in supermarkets (5.4%).


External Merchandise Trade Rises in July 2004

In July 2004, the values of Hong Kong's total exports and imports of goods both showed strong year-on-year increases. Exports to East Asia as a whole remained vibrant, led mainly by sustained surge in exports to the mainland of China, Japan, Singapore and the Republic of Korea. Exports to the European Union likewise continued to record double-digit growth. Exports to the United States grew further, albeit still at a relatively modest pace.

The value of total exports of goods (comprising re-exports and domestic exports) increased by 16.5% over a year earlier to HK$183.6 billion, after a year-on-year increase of 18.2% in June. Within this total, the value of re-exports increased by 18.3% to HK$171.9 billion in July 2004, while the value of domestic exports decreased by 4.1% to HK$11.7 billion. Concurrently, the value of imports of goods increased by 18.4% over a year earlier to HK$189.3 billion in July 2004, after a year-on-year increase of 21.5% in June.

A visible trade deficit of HK$5.6 billion, equivalent to 3.0% of the value of imports of goods, was recorded in July 2004. This was larger than the corresponding deficit of HK$2.3 billion, equivalent to 1.4% of the value of imports of goods, recorded in July 2003.

Consumer Price Indices for August 2004

According to the Hong Kong Census and Statistics Department figures, overall consumer prices rose by 0.8% in August 2004 from a year earlier, further to a 0.9% increase in July.

The smaller year-on-year increase in the Composite CPI in August 2004 than in July 2004 was mainly attributable to moderate increases in charges for package tours, in inbound and outbound transport fares and in the prices of fresh vegetables and poultry.

Analysed by sub-index and on a year-on-year comparison, the CPI(A), CPI(B) and CPI(C) rose by 1.4%, 0.7% and 0.1% respectively in August 2004, also smaller than the corresponding increases of 1.5%, 0.8% and 0.4% in July.


Increase in August 2004 Tonnage Throughput 

According to the Hong Kong Air Cargo Terminals Limited, August 2004 air cargo tonnage throughput was 184,343 tonnes, representing a year-on-year growth of 11.8%. Cumulative tonnage from January to August 2004 was 1,438,256 tonnes, up 15.6% compared with the same period last year. 
Growth momentum was sustained in the export sector, with export tonnage for August 2004 at 105,409 tonnes, representing a year-on-year growth of 16.1%. Export volume growth from January to August 2004 was strong – up 20.3% year-on-year, with a total of 791,618 tonnes of export cargo being handled in the period. 
The import sector registered a slight decline of 0.1% to 52,848 tonnes in August 2004. Aggregate import tonnage for the period January to August 2004 was 462,679 tonnes – up 11.0% year-on-year. 

July Visitor Arrivals Surge to Record 1.99 Million 

Visitor arrivals in July 2004 soared to 1,990,704, the highest figure ever recorded in a single month.

The strong performance is especially notable as July has not traditionally been a strong tourism period. Key contributing factors were the Hong Kong Shopping Festival and the continued increase of individual visitors from Mainland China. The result represents a 54.1% growth compared with the same period in 2003.

HKTB Executive Director Clara Chong noted that “North Asia has returned to positive growth for the first time in 17 months.” However, she added, “we need to strengthen our efforts in markets that have not yet made a full recovery, like Japan and Taiwan, and continue to work hard in the other markets to ensure that the nascent recovery can be sustained.”

Ms Chong said that efforts since 2002 to promote Hong Kong as a summer shopping destination were proving successful. “With more than 6,500 shops and restaurants participating citywide, and a strong promotional emphasis being put on late-night shopping, dining and entertainment, the Festival is not only attracting more visitors, but is also stimulating their spending and enjoyment.”

For the first seven months of 2004, total arrivals stand at 12,003,323 – 65.8% ahead of the same period in 2003.


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