Improving labor market conditions and stronger inbound tourism have continued to boost consumption in the city, with retail sales in March jumping another 19 percent, the government said Monday.

Total retail sales in March amounted to HK$24.7 billion, up 19 percent from a year earlier, marking the seventh consecutive rise.

In volume terms, which nets out the effect of inflation, total retail sales increased by 17.2 percent in March compared with a year earlier.

"Retail sales continued to grow robustly in March, supported by strengthening consumer sentiment on the back of improving labor market conditions and also by the vibrant expansion of inbound tourism," a government spokesman said.

"The ongoing economic recovery should continue to provide support to retail business in the period ahead," he added.

Economists in the private sector sounded a similarly upbeat tone.

"It won't be difficult for the growth in retail sales to maintain a double-digit pace in the second quarter," Irina Fan, a senior economist at Hang Seng Bank, told China Daily.

She attributes the robust growth in retail sales to stronger consumer confidence supported by improving labor market conditions and the positive-wealth effect associated with the strong rebound in the property and stock markets.

"The positive-wealth effect began to emerge in the fourth quarter of last year, while various stimulus measures implemented by the government after the global financial crisis have helped improve the labor market," Fan explained.

"Spending by visitors, particularly visitors from the mainland, who are backed by strong economic growth there, also helped boost retail sales," she said.

Another private-sector economist, Paul Tang, chief economist of Bank of East Asia, is also optimistic about the outlook for retail sales in coming months.

"The growth pace should be able to stay at a double-digit level in the second quarter," he said of retail sales, citing the improving employment situation.

The city's jobless rate could ease further to around 4 percent by the end of the year after falling to 4.4 percent in the January to March period from 4.6 percent in the December-February period, Tang predicts.

Looking at a longer horizon, Hang Seng Bank's Fan, however, is a bit cautious.

"There are uncertainties surrounding economies overseas in the second half of this year," she said.

The growth in overseas economies may slow down in the second half and demand from overseas markets may also soften after the re-stocking process there is completed, she said.

This may have an impact on the city's economy and its labor market, she suggested.

In February, retail sales surged 35.8 percent to HK$26.9 billion from the same month in 2009. In volume terms, retail sales increased by 31.5 percent year-on-year in February.

In the first three months, retail sales climbed by 18.8 percent in value or 15.8 percent in volume over the same period a year earlier.

China Daily

(HK Edition 05/04/2010 page2)