Hong Kong is a city heavily dependent on international trade, and despite its small geographic size it ranks as the ninth largest trading entity in the world. Exposure to global markets saw negative impact during the recent global economic turmoil, although close ties to China resulted in a faster-than-expected recovery. While Hong Kong’s GDP shrank 3.9 per cent in 2009, amid the global economic slowdown (its lowest rate on record), it bounced back to 1.5 per cent in 2012 and further recovered to 2.9 per cent in 2013.
Although Hong Kong’s GDP growth in the first quarter of 2014 was slower than expected at 2.5 per cent, due in part to bad weather in the US, which affected Hong Kong exports, the island economy is well-placed for solid growth throughout the remainder of the year, particularly as US and European economies show further signs of recovery.
Consumer confidence in Hong Kong largely reflects the country’s economic outlook – while Nielsen’s Consumer Confidence Index for Hong Kong recorded a score of 86 in 2009, confidence has rebounded in recent years, reaching a Consumer Confidence Index of 111 in the first quarter of 2014, 15 points above the global Consumer Confidence Index of 96 in the same quarter, driven by consumers’ positive perceptions around the state of their personal finances and job prospects. Hong Kong’s latest unemployment figures show it remains in a state of full employment, while recent positive forecasts on salary adjustments show salaries rising faster than the forecasted inflation rate.
Rising optimism and the positive outlook for Hong Kong is helping to drive consumers’ readiness to spend, and this was evidenced by the uplift in 2014 Chinese New Year gifting sales. Chinese New Year sales increased by a healthy 9.6 per cent in 2014 compared to 3.6 per cent in 2013, with particularly strong sales growth noted in key festive categories such as wine (up 19 per cent), biscuits (up 11 per cent) and chocolate (up 10 per cent). In contrast, retail sales in Hong Kong fell in the opening months of 2014. According to Hong Kong’s Census and Statistics Department, April saw a 9.8 per cent decline in retail sales, the biggest drop in five years, with items such as jewelry and watches being hardest hit. The fall in retail sales came amidst falling mainland visitor numbers, although the Hong Kong Tourism Board predicts 8.6 per cent growth in total visitor numbers by the end of 2014, potentially signaling a recovery for waning retail sales.
Along with rising confidence, increasing access to connected devices and the capabilities of those devices is helping to shape the behaviours and purchasing habits, as well as the media consumption, of consumers in Hong Kong. Mobile penetration in Hong Kong is at saturation point (95 per cent), and smartphone penetration is rising fast having reached 87 per cent in 2013, equal highest in Asia Pacific alongside Singapore. Along with this increase in mobile, and particularly smartphone, usage is a surge in m-commerce. Close to two in five consumers in Hong Kong (18 per cent) shop on their mobile phones, the second highest rate in Asia Pacific behind China, and 14 per cent of Hong Kong consumers have undertaken mobile wallet activity, the highest rate in Asia Pacific.
While Hong Kong’s key economic indicators for the remainder of 2014 are relatively positive, uncertainty remains in the market, particularly with the recovery of global economies still to be seen, all of which is contributing to a cautiously optimistic outlook for the second half of 2014 and into the coming years.