Credit Suisse predicts Hong Kong recession in Q3

Credit Suisse Group AG predicts Hong Kong’s growth to fall to 1.4% this year from its previous forecast of 2% on weakening domestic demand.

Hong Kong’s economy grew by only 1.1% in the second quarter of this year versus the same period a year earlier and has slowed since then with retail sales and exports remaining stubbornly weak. Credit Suisse said there is every chance the economy will again contract in the third quarter, thereby pushing the economy into a technical recession.

It also lowered its Hong Kong GDP growth forecast in 2013 to 3.4% from 3.9%.

The bank believes consumption is losing steam as retail sales volume edged up by only 1.3% year-on-year in July compared to the 7.3% growth in the second quarter. It expects retail sales growth to remain weak in August and September.

J P Morgan and Fitch Ratings confirmed their previous estimates that Hong Kong's GDP growth this year is expected to be around 1.2%.

Credit Suisse also cut its forecast on China's GDP growth in 2012 and 2013 to 7.5%, down from 7.5% and 7.9%, respectively.