CONFIDENTIAL
FM HONG KONG
TO DESKBY 10100OZ FCO
TELNO 2197
OF 100908Z JULY 91
CONFIDENTIAL
нио
10 926/1
172
055024
MDHIAN 4855
TOP COP Q DIST?
SK
17L 1991
FILL
РА
MIPT: LORD CAITHNESS' VISIT TO HONG KONG, 22-25 JULY: BRIEF ON HONG KONG ECONOMY
1. THE PICK-UP IN ECONOMIC ACTIVITY IN THE LATTER PART OF 1990 CONTINUED INTO THE FIRST HALF OF 1991. BOTH EXTERNAL AND DOMESTIC DEMAND SHOWED FURTHER IMPROVEMENT. RE-EXPORTS REMAINED ROBUST IN THE FIRST FIVE MONTHS OF 1991, GROWING BY 28 PERCENT IN VALUE TERMS, OR ABOUT 25 PERCENT IN REAL TERMS, OVER THE SAME PERIOD IN 1990. DOMESTIC EXPORTS CONTINUED TO REVIVE, INCREASING BY 5 PERCENT IN VALUE TERMS OR ABOUT 3 PERCENT IN REAL TERMS OVER THE SAME PERIOD.
2. LOCALLY, INVESTMENT DEMAND IMPROVED IN LINE WITH THE BETTER BUSINESS CLIMATE. REFLECTING THIS, RETAINED IMPORTS OF CAPITAL GOODS INCREASED STRONGLY, BY ABOUT 11 PERCENT IN REAL TERMS IN THE FIRST FIVE MONTHS OF 1991 OVER A YEAR EARLIER. RETAINED IMPORTS OF CONSUMER GOODS SHOWED A MODERATE INCREASE (YEAR-ON- YEAR) OF ABOUT 3 PERCENT IN REAL TERMS IN APRIL AND MAY COMBINED, FOLLOWING A DECLINE IN THE FIRST QUARTER. THE VOLUME OF RETAIL SALES ALSO RECORDED AN APPRECIABLE INCREASE IN APRIL.
3. LOCAL INFLATIONARY PRESSURES REMAINED SUBSTANTIAL. THE YEAR- ON-YEAR RATE OF INCREASE IN THE CONSUMER PRICE INDEX (A) ACCELERATED DURING THE FIRST FOUR MONTHS OF 1991, PEAKING IN APRIL BEFORE COMING DOWN SLIGHTLY IN MAY. TAKING THE FIRST FIVE MONTHS TOGETHER, THE AVERAGE YEAR-ON-YEAR RATE OF INCREASE IN THE CPI(A) WAS 12.6 PERCENT.
4. THE LABOUR MARKET EASED IN RECENT MONTHS. THE EMPLOYMENT RATE FOR THE SECOND QUARTER WAS 2.4 PERCENT AND THE UNDEREMPLOYMENT RATE WAS 1.7 PERCENT. BOTH FIGURES WERE HIGHER THAN THOSE IN THE FIRST QUARTER. THE NUMBER OF VACANCIES DECLINED, PARTICULARLY IN MANUFACTURING AND CONSTRUCTION. THE EASING OF THE LABOUR MARKET, ALONG WITH LOWER OIL PRODUCT PRICES AFTER THE ENDING OF THE GULF WAR, STABLE WORLD COMMODITY PRICES AND A RELATIVELY STRONGER US DOLLAR, SHOULD HELP TO ALLEVIATE SOME OF THE INFLATIONARY PRESSURES IN DUE COURSE.
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