Unemployment in Hong Kong creeping up to 3.3%

Other signs show slowing growth.

It has been noted that there are three macro data points that suggest Hong Kong is slowing further.

According to a research note from Barclays, these include July tourist arrivals down 8.4% y/y and unemployment creeping up to 3.3%.

Underlying inflation, stable at 2.6%, was also cited. At the micro level the news does not get much better with Coach reportedly terminating the lease for its flagship store two years early.

Here's more from Barclays:

July visitor arrivals falls 8.4%. Hong Kong received 8.4% fewer visitors in July compared to a year ago. According to the Secretary for Commerce and Economic Development, visitors, particularly mainlanders, were more inclined to travel to alternative destinations like Japan where the currency made it more affordable.

The 8.4% drop is the first year on year decline that has been recorded over the peak travel season of July. This drop also lowered the first seven months visitor arrivals growth to only 1.0% (to 34.25mn), well below the Tourism Development Board’s 6.4% full-year growth target.

Unemployment edged up to 3.3% in July 2015. Hong Kong’s unemployment rate edged up by 0.1ppt to 3.3% in May-July 2015. The increase in unemployment was mainly seen in the arts, entertainment, recreation, and transportation sectors. While the under-employment rate was stable at 1.4% in May-July 2015, increases were also observed in the decoration, repair and maintenance for building sector.

Total employment increased slightly by 6,200 but the labour force also increased by around 10,400 persons. Commenting on the short-term labour market outlook, the Secretary for Labour and Welfare said “The near-term labour market outlook will continue to hinge crucially on the overall economic situation. However, a number of external and domestic uncertainties, including notably the impending US interest rate lift-off, gyrations in global financial markets, as well as the weak trend in inbound tourism, continue to warrant concerns."

Underlying inflation stable at 2.6%. Hong Kong’s underlying inflation rate was 2.6% in July, same as June. Headline CPI was 2.5% in July, smaller than June 2015’s 3.1%. The larger increase in June was attributed to the expiry of the Government’s provision of electricity subsidy in June 2014.

Among the various CPI components, year-on-year increases were recorded for meals bought away from home (+4.4%), housing (+4.3%), food (+4.3%), electricity, gas and water (+1.0%). On the other hand, price decreases were recorded for durable goods (-5.6%) as well as clothing and footwear (-2.9%).

Coach terminates its Central lease two years early. According to the Hong Kong Economic Times, leather goods retailer Coach, is asking to terminate the lease for its Central flagship store early. Since 2008, the store on Queens Road Central had served as Coach’s flagship store in Hong Kong with monthly rents of HK$7.2mn including signage rights.

The existing lease was to expire in October 2017 but facing the retail sales slowdown, the tenant is asking for early termination. According to the Hong Kong Economic Times, luxury jeweller Harry Winston is in talks to take over the space for HK$5.7mn/month, down 20% from the existing rent that Coach was paying.