HONG KONG (Reuters) – Hong Kong retail sales, a key part of the city’s economy, felt a growing impact in June from mass protests, government data showed yesterday.
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The government said June retail sales fell 6.7 percent from a year earlier, the biggest decline since February, as local consumer sentiment turned cautious and growth in visitor arrivals slowed.
Protests against a proposed extradition law began in late April and widened in June, though they remained peaceful until July, when there was violence at some demonstrations.
Businesses say with the violence has added to the toll on tourism and the pivotal retailing industry.
Many businesses in Hong Kong are already facing strains from China’s economic slowdown, a weak Chinese yuan and fallout from the Sino-US trade war.
“The near-term performance of retail sales will likely remain subdued, as the weakened global and local economic outlook and other headwinds continue to weigh on consumption sentiment,” a government spokesman said after release of the June retail data.
“The recent mass demonstrations, if continued, would also dent the retail business further,” he said.
Retail sales fell to HK$35.2 billion ($4.50 billion), a fifth consecutive month of declines. May’s decline was revised fractionally to 1.4 percent.
For 2019’s first half, retail sales fell 2.6 percent in value from a year earlier.
“The decline trend of retail sales industry in the coming months will be more obvious, which may fall more than 10 percent,” said Angela Cheng, an economist at CMB International Capital. “We remain pessimistic about Hong Kong’s future retail business.”
On Wednesday, Hong Kong reported its economy had 0.6 percent annual growth in the second quarter, below the average forecast of 1.6 percent from five economists.
Fitch Ratings said on Tuesday the unrest could damage business confidence and the quality of governance. It also raised longer-term concerns about policy paralysis and erosion of the rule of law. Fitch affirmed Hong Kong’s AA+ rating on June 11.
Hong Kong retailers say they expect sales for July and August to drop by double-digits from a year earlier, while hoteliers are bracing for a wave of cancellations.
The city’s Federation of Trade Unions said hotel occupancy rates fell 20 percent in June year-on-year, and probably 40 percent in July.
Tourism, especially from mainland China, has dropped markedly. Britain, Japan, Singapore and others have issued travel alerts.
June tourist arrivals rose 8.5 percent from a year earlier to 5.14 million, according to the Hong Kong Tourism Board, slowing from a 19.5 percent rise in May. Mainland visitors increased 10.1 percent, accounting for 77.8 percent of the total.
The Hong Kong Retail Management Association has changed its full-year retail sales forecast to a double-digit fall instead of single-digit growth. PwC has revised its Hong Kong full-year retail sales forecast to a 5 percent drop, from a 3 percent fall.
Sales of jewellery, watches, clocks and valuable gifts fell 17.1 percent on-year in June, data showed, after a revised 2.9 percent drop in May.
Medicines and cosmetics fell 4.1 percent in June, compared with revised 1.5 percent growth in May. Department store sales slid 6 percent in June, against a 0.3 percent gain in May.