Hong Kong first quarter real GDP up 7.2%

The economy is poised for a real growth of 5%-6% for this year, up one percentage point from February forecast announced in February..

The strong momentum in Hong Kong’s economy continued in the year's first quarter, with real Gross Domestic Product leaping 7.2% year on year, Government Economist Helen Chan announced on Friday.

Growth in the first quarter was slightly higher than the already appreciable 7% growth for 2010 as a whole, she said, marking the fifth consecutive quarter that growth was distinctly above the average annual growth over the past 10 years.

On a seasonally adjusted quarter-to-quarter comparison, Gross Domestic Product grew by 2.8% in real terms.

Speaking at a press conference on Friday, Mrs Chan said the external environment has held up well so far this year as the global economy has continued to expand, led by the thriving Asian and emerging economies, according to a government report.

Yet uncertainties in the external environment still abound which will pose some downside risks to Hong Kong’s external trade, possibly causing export growth to slow in the coming quarters.

She said with real Gross Domestic Product churning out a stronger-than-expected 7.2% year on year growth in the first quarter, and even allowing for some moderation in the rest of the year, the economy is poised for a real growth of 5%-6% for this year as a whole, revised upwards by one percentage point from the 4%-5% forecast announced in February. Most private sector analysts are currently projecting the economy to expand by 4.5%-6%, averaging at around 5.2%.

Underlying consumer price inflation, which nets out the effect of the Government’s relief measures to reflect the inflation trend more accurately, rose to 3.7% in the first quarter from 2.4% in the fourth quarter of last year. The further increase in price pressure lately was the combined results of rising imported inflation and local costs.

Inflation forecast revised
With domestic and external factors both adding to local inflation in the near term, the forecast rates of headline and underlying consumer price inflation for this year as a whole are revised upwards to 5.4% and 5.5%, from the 4.5% first announced in the Budget in February.

Mrs Chan said merchandise exports resumed the strong uptrend in the first quarter, surging by 16.8% in real terms over a year earlier.

Exports of services likewise stayed buoyant in the first quarter, leaping by 9.1% in real terms over a year earlier, with particularly spectacular performance in exports of financial and business services.

On the domestic front, private consumption expenditure grew strongly in the first quarter, by 7.6% in real terms over a year earlier, on the back of improving job and income situations. Yet machinery and equipment investment, which is usually rather volatile, reverted to a decline, thereby resulting in a modest 1.1% fallback in overall investment spending in the first quarter.

The seasonally adjusted unemployment rate came down progressively to 3.4% in the first quarter, largely back to the post-1997 low of 3.3% in mid-2008. Labour wages and earnings continued to increase. The median household income rose by 5.6% in the first quarter in nominal terms over a year earlier, or by 1.7% in real terms after discounting inflation.

Over the same period, average employment earnings for the lowest decile of full-time employees rose by 6.2% in nominal terms or by 2% in real terms.

Overall residential flat prices rose by 9% during the first quarter, surpassing the peak in 1997.