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Saturday, Sep 19, 2020

Hong Kong protests continue to batter retail sector as sales plunge 23.6 per cent in November, the second biggest drop on record

Consumer spending drops to HK$30 billion (US$3.84 billion) for the month after a record 24.4 per cent year-on-year slump in October, figures show. Hardest-hit goods were luxury items such as jewellery, watches and valuable gifts, which recorded a staggering 43.5 per cent drop in sales value

Hong Kong’s retail sector continues to take a beating as sales plunged 23.6 per cent in November from the previous year, the second largest drop on record, as tourism and consumption activities were severely affected by increasingly violent anti-government protests.

Consumer spending dropped to HK$30 billion (US$3.84 billion) for the month after a record 24.4 per cent year-on-year slump in October, according to the Census and Statistics Department on Friday. For the first 11 months, the decline was 10.3 per cent against the same period last year.

Retail sales continued to fall sharply in November as protests turned extremely violent, causing severe disruptions to tourism and consumption-related activities and further dampening consumption sentiment, a government spokesman said.

“The near-term outlook for the retail trade continues to hinge on how local social incidents will evolve. As such, ending violence and restoring social order are essential to the recovery of the retail trade and indeed that of the whole economy,” he said.

The hardest-hit goods were luxury items such as jewellery, watches and valuable gifts, which recorded a staggering 43.5 per cent drop in sales value, followed by medicines and cosmetics with a 33.4 per cent fall. Sales of commodities in department stores also tumbled almost 33 per cent.

Mass demonstrations sparked by the now-withdrawn extradition bill have gripped the city since June, and regularly end in violent clashes between radical protesters and police, spilling over into shopping malls. Masked mobs have also vandalised railway stations and blocked roads, disrupting travel, and trashed shops and other businesses with links to mainland China.

Financial Secretary Paul Chan Mo-po earlier warned that gross domestic product (GDP) was expected to contract 1.3 per cent for the whole financial year with the economy buffeted by the double whammy of the US-China trade war and the anti-government protests. He also said the government was on course for its first budget deficit in 15 years.

The government has rolled out four rounds of relief measures worth more than HK$25 billion in the past few months to mitigate the economic woes. The latest ones, announced last month and worth about HK$4 billion, primarily involve subsidies on utility bills and allow qualified individuals and companies to pay tax bills in instalments.

Hong Kong has already officially slipped into recession. The economy shrank 3.2 per cent in the third quarter, from the previous quarter. GDP shrank 2.9 per cent in the third quarter year on year, the biggest contraction in a decade.

Tourist arrivals in Hong Kong took the sharpest plunge in November at 56 per cent year on year to only 2.65 million, closest to the slump when the city was hit by an outbreak of Severe acute respiratory syndrome (Sars) in 2003.

Annie Tse Yau On-yee, chairwoman of the 9,000-member Hong Kong Retail Management Association, warned of a wave of shutdowns in the sector.

An association survey last month of 170 members indicated a rising trend of shop closures, she said.

“I believe the retail sector will continue to face a difficult time in the first half of this year as I still can’t envisage that the social unrest will be resolved any time soon,” Tse said.

“The outlook for retail sales very much depends on the repercussions of the social turmoil, which has severely dampened consumer sentiment.”

However, she noted the survey showed a slight improvement in consumer spending in December.

“According to members, as the social unrest started to calm down in December with the festive season kicking in, retail sales got a bit better last month and would continue to January,” she said. “However, even if the unrest has died down, it will take at least three to six months for the city to restore consumer and tourist confidence.

“Therefore, we think retail sales will continue to drop year on year in the first half of this year.”


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