Hong Kong’s retail sales dropped 0.9 per cent last year over 2021’s levels, but industry experts said they expect to see improvement in the second half of this year after the full reopening of the border with mainland China next Monday.

Provisional figures released by the Census and Statistics Department on Friday showed the city’s retail sales amounted to HK$349.9 billion (US$44.6 billion) last year. The total volume of sales decreased by 3.4 per cent over 2021’s figures.

For December, sales grew by 1.1 per cent against the same month in 2021, to hit HK$33.7 billion, and online buys rose by 12.9 per cent to hit HK$4 billion.

Online retail sales for all of last year increased by 20.8 per cent when compared with 2021, hitting HK$34.6 billion.

A government spokesman said December’s increase was the result of improved economic sentiment and the further relaxation of social-distancing measures. The fifth Covid-19 wave in early 2022 contributed to the 0.9 per cent decline in retail sales, he noted.

“Looking ahead … the return of economic activities from the epidemic to normalcy and an expected increase in inbound visitors should bode well for retail sales performance. Improved labour market conditions will provide further support,” he said.

The Hong Kong Retail Management Association said the slight rise in December’s sales reflected a lack of substantial improvement in the economy, despite inbound quarantine for travellers being scrapped on December 13.

Annie Tse Yau On-yee, chairwoman of the association, said an internal survey found that over half of the city’s retailers experienced a decrease in business in December.

“December tended to be a peak season for the retail sector. Generally speaking, most of our members would report an uptick in sales, but over half reported a drop in business,” Tse said.

The representative said retailers expected sales to grow between 10 per cent and 40 per cent in the first quarter of this year, but the sector might only see substantial improvement in the second half.

The government announced on Friday it would drop all Covid-19 curbs for travellers crossing the border with mainland China on Monday, including daily quotas.

Tse said the resumption of quarantine-free travel since January 8 in the first phase of the border reopening did not bring an influx of tourists as expected. Nearly 30 per cent of retailers surveyed described their business levels as “weak”, while more than 90 per cent said customer traffic was middling under relaxed entry measures into the city.

“Overall, the return of tourist spending from the city’s reopening is still at a preliminary stage. There hasn’t been a significant improvement in business yet,” she said.

Tse said, however, more than 80 per cent of retailers had seen an increase in sales during the Lunar New Year holiday period last month, though none recorded in excess of 40 per cent growth.

Overall, an improved atmosphere has boosted spending, Tse said. “As the borders have reopened, there was also motivation to spend for those returning home to the mainland for the new year, as they would purchase goods for their friends and family,” she added.

Department stores, cosmetics, optical shops, jewellery and watches, and health food sectors, benefited from the extra holiday spending the most.

They had between 20 per cent and 30 per cent growth, while clothing, personal care products and convenience stores recorded no more than 10 per cent growth, Tse said.

Tse highlighted the reopening had led to a surge in travel by residents, which dampened certain sectors of the city’s retail market, such as furniture and supermarkets.

Retail sector lawmaker Peter Shiu Ka-fai said December’s figures were within expectations, as the city’s retail market was still reliant on Hongkongers.

“For December, we had Hongkongers leaving the city to travel, while there was no influx of tourists before the reopening with mainland on January 8. Thankfully, the relaxation of almost all anti-epidemic curbs and the World Cup brought in some consumption activity,” Shiu said.

He said the full reopening of the border with the mainland was a “strong stimulant” to the local retail market.

Shiu added the city could expect a sizeable uptick in the number of tourists towards the middle of the year.