This is due to the one-off cash handouts to the consumers in this year’s revised budget.
UBS Investment Research noted:
What the numbers say: 1Q11 GDP grew a better-than-expected 7.2%y/y. Sequential growth also picked up, driven predominately by the acceleration in exports.
What they mean: GDP is the broadest measure of economic activity. It is strongly correlated with the profit cycle and provides important clues about inflation and the direction of policy. However, GDP has less relevance for cyclical policymaking because monetary policy is set by the US Fed according to the logic of Hong Kong’s fixed exchange rate. A strong commitment to the fixed exchange rate also limits fiscal policy in practice.
12-month outlook: Hong Kong’s economy is holding up well, underpinned by resilient private consumption. With the one-off cash handouts to the consumers in this year’s revised budget, we now expect private consumption to grow 6.0%y/y in 2011. This, plus the stronger-than-expected outturn in 1Q11, has led us to fine tune our 2011 GDP forecast to 5.5% from 5.0% previously.
In terms of Consumption, here's more from UBS Investment Research:
What the numbers say: Private consumption slowed moderately in 1Q11, rising 7.6%y/y (2.9% q/q annualised).
But retail sales, largely driven by increased spending by the tourists, continued to surprise on the upside.
What they mean: Private consumption accounts for 61% of Hong Kong’s gross domestic product and thus the economy tracks very closely with consumption. In particular, monthly retail sales often provide very important clues about the strength of GDP.
12-month outlook: The cash handouts from this year’s budget, at an estimated HK$30-36bn, are significant. If we assume that half of the handouts will be spent domestically, the boosts to domestic consumption could be as high as 1.0 to 1.3 percentage points this year.
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