07.03.08, 7:33 AM ET
HONG KONG (XFN-ASIA) - Retail sales growth in Hong Kong is likely to 'decelerate significantly' in the coming months after moderating in May, said Sebastien Barbe, senior economist for Asia at Credit Agricole in Hong Kong.
'Two key factors are adversely affecting private consumption in Hong Kong, rising inflation and the continuing correction in the stock market,' he said.
'Consumption has moderated in the face of rising inflation,' he said.
'With the ongoing turmoil in the global equity markets, many people here who invest in stocks understandably became more cautious and reduced consumption of a host of goods,' he said.
The government announced today retail sales rose 12.9 pct year-on-year in May to 23.1 bln hkd and expanded 5.5 pct in volume terms.
That marks a slowdown from April, when retail sales grew a revised 18.6 pct in value from a year earlier and were up 11.5 pct in volume terms.
A government spokesman attributed the slower retail sales growth to high base of comparison in May last year, when sales started to register double-digit growth.
He added that the expected global economic slowdown, ongoing financial market turbulence, inflation and high international commodity prices, rising global interest rates, and consolidation of local asset prices are likely to have an impact on the Hong Kong economy and consumer sentiment.
Barbe sees Hong Kong retail sales growth in value terms to fall below 10 pct towards the end of the year.
'I expect average growth this year at 9-10 pct, with the average figure probably around 7-8 pct early next year,' he said.
'Global inflation is currently on the rise, the US equity market remains weak, interest rates are on the rise and global economic growth is slowing,' he said.
'I therefore expect a significant deceleration in Hong Kong retail sales growth in the coming months,' he said.
(1 usd = 7.8 hkd)
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