Hong Kong GDP might have grown 6.6% in 2010

GDP for the last quarter of 2010 might have grown 5.0% year-on-year.

According to DBS, the full year growth of 6.6% is the highest since 2006.

Sequentially, GDP growth is estimated to have quickened to 0.9% in 4Q (QoQ,sa) from 0.7% in 3Q. Consumption, investment (GDFCF) and net exports will all contribute positively to headline growth.

Private consumption will advance steadily at a rate of 4.9% YoY in 4Q10 on the back of a tight labor market signified by the fall of unemployment rate to 4.0% by end Dec from 4.2%in 3Q10. The surge of retail sales growth from 17.8% in 3Q to 18.9% in 4Q (3mma, sa) reflects the impact of rising inflation and persistent spending strength from mainland visitor (Chinese tourists spending accounts for about 70% of total visitor spending). On the investment front, GDFCF is projected to expand 8.5% in 4Q, up from 0.3% in 3Q as evidenced by the collective optimism shown by the Business Tendency Survey 4Q10 published by the government. Public investment, the uptrend already observed on the building and construction component since 1Q10 is expected to hold because spending on infrastructure aiming at improving the transportation ties with the mainland will likely accelerate.

As far as external trade is concerned, the increase of the annual merchandise trade deficitto USD43.1bn, from USD 28.9bn in 09 is a clear reflection of strengthening domestic demand. In summary, faster economic growth warrants higher inflationary pressure. The composite CPI rocketed to 2.5% last year from 0.5% in 09 with a clear accelerating uptrend seen in 2H10 and will carry forward to 2011.