VIII. PERFORMANCE OF THE ECONOMY
(a)
General Situation
42.
Led by a strong recovery in domestic exports since March,
1986 saw a marked upturn in the Hong Kong economy. Domestic exports
grew by 13% in
in real terms,
in the first nine months of 1986, over
as
a
same period last year, in contrast with a decline of 5% in 1985
This recovery was
to attributable partly
whole.
improved
demand for Hong Kong's products in many of its major overseas markets, and partly to improved external competitiveness caused by
the depreciation of the Hong Kong dollar against most major currencies, in line with the depreciation of the US dollar under the linked exchange rate system. For the first nine months of 1986
re-exports grew by about 7% in real terms.
43.
helped
to
In
The strong recovery in domestic. exports has maintain employment at a high level and to boost Labour incomes. the third quarter of 1986, the seasonally-adjusted unemployment rate was 2.8% and the underemployment rate was 1.3%. Employment continued to grow particularly in the financial and other business services sectors and in the distributive trades. Earnings in most
increased significantly both sectors
terms and in real
terms.
in money
44.
In Line with the improved economic
demand has also
conditions,
reflected
as up,
private
by
consumption
firmed
the
relatively high growth rates of retained imports of consumer goods and of foodstuffs, at 9% and 11% respectively in real terms in the
first nine months of 1986.
45.
Except for one or
two temporary aberrations the exchange rate of the Hong Kong dollar against the US dollar has remained stable around the linked rate of HK$7.80 to US$1 during the year. However reflecting the depreciation of the US dollar, the effective exchange rate index of the Hong Kong dollar fell from 70.6 in end-Deceab 1985 to 64.8 in end-December 1986.