Hong Kong's GDP expected to pick up in 2Q16

After sluggish growth rate of 0.8%.

Recent data suggests that Hong Kong’s gross domestic product (GDP) should improve in the second quarter after recording an annual growth rate of 0.8% in the first quarter, the lowest in four years.

According to a research note from Hang Seng Bank, the annual rate of decline in retail sales volume eased to 8.4% in April-May, an improvement on the 11.2% recorded for the first three months of the year. In addition, exports were down only 0.1% year-on-year in May, less than the 2.3% drop in April and the slowest rate of decrease since April 2015.

This contributed to a narrowing in the deficit on trade in goods to HKD26.2 billion in May from HKD31 billion in April. Nevertheless, the underlying picture remains weak, said the report. Retail sales of consumer durables fell by almost 21% in May – the largest fall since February – reflecting the adverse impact of the persistent global economic uncertainty and financial market volatility on household spending activity.

Here's more from Hang Seng Bank:

In addition, the slowing pace of economic growth in mainland China has resulted in the number of visitors from the Mainland to Hong Kong dropping by an annual rate of 8.3% in May after a 4% decline in April, pointing to a continued slowdown in tourist spending.

The recent improvement in trade flows appears to have been more related to higher commodity prices than to stronger global economic growth. The Commodity Research Bureau (CRB) commodity price index, a basket of key commodities, has risen by about 10% in 2016 to date, but growth in advanced economies, in particular the US and the Eurozone, has remained moderate. Without a pickup in growth in these economies, which are the leading markets for Asian exports, Hong Kong’s trade growth is unlikely to be sustainable.