Hong Kong_ Retail sales roughly in line with expectation of an 8.3%oya fall. Thu Jan 02 2025

Summary of the Conference Call Industry Overview - The report focuses on the Hong Kong retail sales sector, highlighting a significant decline in sales figures and the performance of various retail categories. Key Points 1. Retail Sales Performance - Hong Kong's retail sales fell by 8.3% year-on-year (oya) in November, aligning with J.P. Morgan's forecast of -8.6% and significantly worse than the market consensus of -5.4%. This decline widened from 4.8% in October [1][2][3] - For the first 11 months of 2024, retail sales volume decreased by 8.7% oya, while in value terms, sales dropped by 7.3% oya [1][2] 2. Monthly Trends - Seasonally adjusted retail sales volume showed a slight increase of 0.3% month-on-month (m/m), marking the third consecutive month of gains. The underlying trend growth improved to 9.7% on a 3-month annualized rate by November, following a prolonged contraction [1][2] 3. Sector-Specific Performance - Electronics and consumer durable goods led the recovery in September and October but saw a sharp decline of 21.5% oya in November. This followed previous gains of 4.7% and 18.7% in the prior months [2] - Conversely, jewelry, watches, and valuable gifts experienced solid growth, with retail sales increasing by 16.5% m/m in November, building on a 7.5% rise in October [2] 4. Economic Factors Impacting Retail Sales - The strength of the Hong Kong dollar (HKD) and a prolonged high-interest rate environment are expected to continue exerting pressure on local retail sales. The anticipated policy changes following the U.S. elections, including tariff hikes on Chinese exports and tax cuts, may lead to higher inflation and slower Federal Reserve rate cuts [3] - The resumption of the Individual Visit Scheme for Shenzhen residents may attract more tourists, but the overall impact on retail sales is expected to be limited due to soft domestic consumption in mainland China [3] 5. Consumer Sentiment and Economic Outlook - An incomplete recovery in the labor market, muted wage growth, and a negative wealth effect from the ongoing housing market correction suggest that local private consumption will remain under pressure in 2025 [3] Additional Insights - The report indicates a divergence in performance across major retail sectors, with some categories like clothing and footwear showing modest gains, while others like consumer durables are struggling [2] - The overall economic environment, including external factors such as U.S. policy changes, is likely to have a significant impact on Hong Kong's retail landscape moving forward [3]