The Hong Kong economy showed a widened year-on-year contraction in the third quarter of 2022. Real GDP fell by 4.5% from a year earlier, further to a 1.3% decline in the preceding quarter. The worsened external environment and continued disruptions to cross-boundary land cargo flows dealt a serious blow to Hong Kong’s exports. Tightened financial conditions resulting from the sharp interest rate hikes by the major central banks weighed heavily on domestic demand, though the generally stable epidemic situation, improved labour market conditions and the disbursement of consumption vouchers in August rendered support to private consumption. Looking forward, the markedly deteriorating external environment will continue to pose immense pressure on Hong Kong’s export performance. Elevated inflation and continued monetary policy tightening in major advanced economies will dampen global demand further. Heightened geopolitical tensions and the development of the pandemic will also add downside risks. Nonetheless, the relaxed testing and quarantine arrangements for incoming visitors should provide some support to exports of services. Domestically, while improved labour market conditions and the Consumption Voucher Scheme will continue to support consumption demand in the near term, tightened financial conditions and the consequential weak asset prices will partly offset the positive effects. The weakened economic outlook and rising borrowing costs will dampen fixed asset investment. Nonetheless, as long as the epidemic situation remains under control and related restrictive measures are relaxed further, economic activities should gradually return to normal. Taking into account the actual outturn in the first three quarters of the year and the subdued short-term outlook, the real GDP growth forecast for 2022 as a whole is revised down to -3.2%. The forecast rate of underlying consumer price inflation for 2022 is revised down to 1.8%.
The value of merchandise exports registered further visible fall from a year earlier in October 2022 as the external environment deteriorated and disruptions to cross-boundary land transportation continued. Exports to the Mainland, the United States and the European Union recorded double-digit declines, and those to most other major Asian markets saw worsened performance.
Looking forward, Hong Kong’s export performance will stay under immense pressure, as elevated inflation and further monetary policy tightening in major advanced economies will continue to suppress global demand in the near term. The Government will monitor the situation closely.
- Link to press release of external merchandise trade statistics
- Link to press release of volume and price statistics of external merchandise trade
The underlying consumer price inflation remained moderate in October. The year-on-year increase in food prices showed some moderation, though remained relatively fast. Prices of clothing and footwear continued to record a visible increase, and prices of energy-related items rose sharply. But price pressures on other major components remained broadly in check.
Notwithstanding the intensive external price pressures, overall inflation should remain moderate in the near term amid largely mild domestic cost pressures. The Government will continue to monitor the situation.
The labour market continued to improve alongside the revival of domestic economic activities. The seasonally adjusted unemployment rate fell by 0.1 percentage point from July – September 2022 to 3.8% in August – October 2022. The underemployment rate also declined by 0.1 percentage point to 1.7%. Total employment increased by 19 700 to 3 648 600. The number of unemployed persons fell by 7 900 to 147 400.
Looking forward, the short-term outlook for the labour market will depend on the performance of domestic economic activities. The tightened financial conditions will continue to constrain demand. Nonetheless, as long as the epidemic remains under control and anti-epidemic measures are suitably relaxed, coupled with the help of the Consumption Voucher Scheme, economic activities should gradually return to normal.
- Link to press release of unemployment and underemployment statistics
- Link to press release of employment and vacancies statistics
- Link to press release of wage and payroll statistics
The value of retail sales recorded an accelerated year-on-year increase in October alongside the disbursement of a new batch of consumption vouchers. Business of many types of retail outlet saw improvement, with sales of consumer durable goods, and jewellery, watches and clocks, and valuable gifts registering double-digit increases.
Looking ahead, improved labour market conditions and the Consumption Voucher Scheme will continue to provide support to the retail sector, though tightened financial conditions will partly offset the effects. Moreover, as long as the local epidemic situation remains under control and the various restrictive measures can be relaxed in an orderly manner, consumption-related activities should gradually regain momentum. It remains vital for the community to work together with the Government to contain the epidemic.
Other Economic Indicators
- Link to press release of annual survey of companies in Hong Kong with parent companies located outside Hong Kong
- Link to press release of Hong Kong's balance of payments and international investment position statistics