Retail sales up 5.8% in June but below expectations

This was likely driven by continuing social distancing measures.

The value of total retail sales grew 5.8% year-on-year (YoY) in June to $28.1b, but it missed expectations, which the OCBC Treasury Research linked to the persisting social distancing measures.

This is also lower than the 10.4% YoY increase in value, recorded in May, the Census and Statistics Department reported.

For the first half of the year, the value of total retail sales increased by 8.4% compared to the same period in 2020.

“Retail sales missed expectations with a growth of 5.8% YoY in June, probably due to the ongoing social distancing measures,” the OCBC Treasury Research said in a report.

“It also reaffirms the fact that the rebound in local consumption is insufficient to offset the plunge of tourist spending.”

The OCBC said local consumption may rebound further on the back of declining unemployment rate, high vaccination rate as well as the launch of the e-consumption vouchers.

The scheme’s effect, however, may be undermined by the substitute effect or by chances that consumers may use it to cover transport expenses rather than in purchasing goods.

Moreover, the government’s plan to extend and tighten measures for two weeks until 18 August may also affect retail sales.

“In a nutshell, we hold onto our view that retail sales will grow by about 15% YoY this year on the assumption of conditional border reopening between HK and Macau as well as Mainland China in the second half,” the report also read.

Of the total retail sales value, online sales accounted for 8.1%. Its value during the month stood at $2.3b, representing a 63.8% YoY increase.

The revised estimate of online retail sales in May 2021 increased by 52.9% compared with a year earlier. For the first half of 2021, it was provisionally estimated that the value of online retail sales increased by 54.9% compared with the same period in 2020.

“Retail sales continued to increase in June over a year earlier as consumption demand revived further alongside the stable local epidemic and improved labour market situations,” a government spokesman said.

“For the second quarter as a whole, retail sales volume grew by 3.6% over the preceding quarter after seasonal adjustment. Yet with incoming visitors remaining scant, retail sales stayed far below the pre-recession level.”