Hong Kong’s retail business is still struggling.

The Special Administrative Region of China saw its retail sales for the month slump 9.8 percent to 34.7 billion Hong Kong dollars, or $4.47 billion, as tourist flows continued to soften and economic uncertainty weighed on consumers, according to Hong Kong’s Census and Statistics Department.

The March figures came in below the consensus estimate for a drop of 8.8 percent, CLSA analysts said in a note.

“Mainland tourist arrivals remain a drag on the sector, but we are also starting to see weakness in local spending,” the bank’s analysts said.

The March drop was less steep than registered in the first two months of the year. Retail sales in January and February combined decreased 13.6 percent, covering the all-important Chinese New Year holiday shopping season. But observers still appear cautious about their outlook.

CLSA noted less-than-promising indications about spending over the May 2 holiday weekend.

“Over the three-day Golden Week holiday, Mainland tourist traffic grew by [7 percent]. We are collating data but expect sales to be sluggish,” it said. The bank cited numbers from multibrand beauty retailer Sa Sa showing a one percent rise in same-store sales.

The Hong Kong census bureau said it will continue to monitor the situation and the potential impact on the economy.

“Looking ahead, the near-term outlook for retail sales will continue to depend on the performance of inbound tourism, and on the extent to which the local consumption sentiment is affected by the headwinds arising from the sub-par economic conditions and external uncertainties,” it said.

In terms of product categories, the census department said sales of jewelry, watches and clocks and valuable gifts decreased by 20.3 percent over the course of the month. Apparel sales slid 11 percent while those of footwear and accessories fell 4.7 percent.

As reported, mainland Chinese tourists are increasingly likely to bypass Hong Kong in favor of other destinations, such as Europe and Japan, for their shopping. However, that trend could change as currency exchange rates continue to fluctuate. For example, if the recent appreciation of the yen persists, it could deter tourism to Japan.

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