CONFIDENTIAL
THE SHORT-TERM ECONOMIC OUTLOOK
30. Since the beginning of 1975, the evidence suggests that the Hong Kong economy may have bottomed-out, though this cannot be asserted with any degree of certainty since as yet there are no really very clear signs that an upturn in world demand is in sight, though the outlook for the United States economy, which takes some 35% by value of Hong Kong's domestic exports, is certainly now rather more rosy than even a few months ago. However, there have recently been signs of an improvement in Hong Kong's immediate trading prospects. In April the quantities exported began to increase again, by about 12% (over the monthly average for the first quarter) and there was a corresponding increase, of 11%, for imports of raw materials and semi-manufactures). There was also a lengthening of order-books among the larger firms in the second quarter, and employment and electricity consumption in manufacturing industry began to rise. But, it is probable that these indicators simply reflect a desire by customers abroad to top-up stocks that have been run-down to unusually low levels in the face of acute liquidity difficulties. This being the case, the present very mild 'recovery' in Hong Kong could soon peter-out, rather than be sustained, and in this event unemployment could rise even further for it would seem likely that many firms are in liquidity difficulties in Hong Kong as well, partly on account of excessive stockpiling in 1973/74 when commodity prices were high.
31. Meanwhile, bank credit for the purpose of trade and industry remains static, office rents are continuing to fall (by a further 5% in the first half of the year), telephone applications (though not car registrations) remain on a downward trend, and restaurant prices are declining as custom (though no longer the number of tourists) continues to fall. And whilst the number of private building plans submitted for approval increased in the second quarter, wage rates in the building and construction industry, as indeed in the rest of the economy, showed no tendency to change. At best, given that the consumer price index is still stable, real wage incomes are holding
/steady
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.CONFIDENTIAL