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20% in 1973, compared with 6% and 3% respectively in 1972 and 1971, and for the first time since the 1950's, therefore, real wage rates actually declined. Even so, the gross domestic product increased, in real terms, by as much as 121% its highest growth rate since 1969. Although part of this reflected increases in raw material stocks which cannot separately be identified (and hence excluded), the clear implication is that there was a substantial shift of incomes during the year from wages to profits (and this suggests that producers may have over-reacted in their employment policies to many of the difficulties with which they had undoubtedly been faced).
The Oil Crisis and World Recession
25. Then in October 1973 came the oil crisis, followed by its deflationary impact on the world economy and hence on Hong Kong. In 1974 Hong Kong's domestic exports actually declined in quantity terms for the first time since the 1950's (by about 7%) thereby
eliminating the increase in output achieved in 1973. As a result manufacturing employment also declined, by 10%. Reported vacancies continued to fall and unemployment, which in December 1973 stood at around 100,000 or 6% of the economically active population (the working population plus the unemployed), increased significantly. Activity in the building and construction sector also showed signs of easing, though the significant reduction in expenditure on projects for the private sector (about 13%, in real terms) was very nearly offset by increased real expenditure (about 30%) on projects for the public sector (this reflecting the acceleration of the government's expenditure programmes announced in 1972). In the services sector, employment overall remained about stationary, but the situation for individual trades and professions was rather varied; faced with rising costs, many firms moved out of the central business districts and this
contributed to an actual decline in office rents in the second half of the year (of 8% compared with increases averaging 50% in 1973). Against this background, the demand for labour became even more slack and in consequence money wage rates in 1974 hardly increased at all.
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}
/26.
"