Boost­ing spend­ing can of­fer HK respite from un­cer­tain­ties

China Daily (Hong Kong) - - BUSINESS HK -

Boosted by con­sumer spend­ing, the US econ­omy grew at a faster clip in the 2016 third quar­ter than pre­vi­ously fore­cast. This should be good news for Hong Kong, which counts the United States as one of its largest mar­kets.

Strong con­sumer de­mand is ex­pected to lead to a rise in US im­ports from var­i­ous de­vel­op­ing economies, in­clud­ing those in Asia. As a re­gional fi­nan­cial and trad­ing hub, Hong Kong stands to ben­e­fit both di­rectly and in­di­rectly from the pro­jected in­crease in cross-Pa­cific trade.

But, the ques­tion is whether the US econ­omy can con­tinue grow­ing at such a pace. Many econ­o­mists in the US think oth­er­wise. They see growth in the fourth quar­ter slip­ping to be­low 2 per­cent from 3.2 per­cent in the pre­vi­ous quar­ter, adding that other sec­tors of the econ­omy, no­tably res­i­den­tial fixed in­vest­ment and gov­ern­ment spend­ing, are lag­ging be­hind.

While con­sumer spend­ing, which ac­counts for more than two-thirds of the US econ­omy, had grown faster than es­ti­mated, busi­ness ex­pen­di­ture had fallen much more sharply than ex­pected. A New York Times report pro­jected that growth for the whole of this year would be mod­est — at 1.5 per­cent and down from last year’s 2.6 per­cent.

Of more im­me­di­ate con­cern to in­vestors is the pro­jected US eco­nomic per­for­mance af­ter Don­ald Trump is sworn in as pres­i­dent next month. The fo­cus will be on his pro­fessed trade pol­icy which car­ries a dis­tinct pro­tec­tion­ist over­tone.

The un­cer­tain­ties aris­ing from the pro­tracted trade ne­go­ti­a­tions that are ex­pected to be ini­ti­ated by the Trump ad­min­is­tra­tion could dis­cour­age busi­nesses in this re­gion from mak­ing longer term in­vest­ment plans. The re­sult­ing de­cline in de­mand for fi­nan­cial ser­vices would di­rectly hit Hong Kong.

To­gether with the de­cline in ex­port growth in past months, con­tri­bu­tions from fi­nan­cial ser­vices to Hong Kong’s econ­omy have also dropped. Shrink­ing loan de­mand has prompted many lo­cal banks to step up ef­forts to com­pete for the mort­gage-lend­ing and per­sonal-loan busi­nesses.

That has the ef­fect of fu­el­ing the al­ready over­heated prop­erty mar­ket. Hope­fully, easy credit can help boost con­sumer spend­ing, which, to­gether with in­creased pub­lic sec­tor ex­pen­di­ture, would give the lo­cal econ­omy a much needed shot in the arm.


The growth of the US econ­omy in the third quar­ter was higher than ex­pected, which should bode well for Hong Kong, as the world’s largest econ­omy seeks more im­ports from Asia that is driven by con­sumer de­mand.

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