5 THE ECONOMY
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THE year saw mixed performances. Exports of goods and services maintained a strong growth, with the growth rate of exports of services accelerating but that of exports of goods slowing down over the course of the year. Investment spending in machinery and equipment was robust and infrastructural construction remained intensive. On the other hand, consumer demand slackened.
Private sector building activity declined, along with continued consolidation in the property market. With labour supply growing generally faster than total employment, employers had less difficulty in filling vacancies and fewer upward pressures on their labour costs. However, employees faced more intense competition in the job market. Reflecting these developments, the Gross Domestic Product (GDP) grew more - moderately, by 4.6 per cent in 1995, compared with 5.4 per cent in 1994. Consumer -price inflation also moderated, after a temporary rise in the first quarter of the year.
The consolidation in the property market, after several rises in interest rates since the early part of 1994, continued into 1995. Towards the end of the year there were some signs of improvement in trading activity on residential property. The stock market also rebounded in 1995 along with the peaking in the US dollar interest rates during the year.
Externally, re-exports continued to record double-digit growth in 1995, notwithstanding a further enlarged base of comparison and a marked structural shift to transhipment. Domestic exports increased for the first time since 1992. These encouraging performances were underpinned by improved competitiveness following the weakening of the Hong Kong dollar along with the US dollar in the early part of 1995. Import demand in several major overseas markets also firmed up during the year. But export growth slowed as the favourable exchange rate effect gradually dissipated.
The increased export activity and Airport Core Programme works generated larger import requirements. Imports rose markedly in the early part of the year, leading to a further widening in the visible trade deficit. The deficit situation improved substantially over the year as the intake of various consumer goods reduced along with slower consumer spending. However, the visible trade deficit was still somewhat higher in 1995 than in 1994.
As to invisible trade, exports of services showed a further marked increase in 1995, bolstered by a surge in offshore trading activities — particularly those involving transhipment flows into and out of China. Exports of other trade-related services, as well as professional and various business services maintained steady increases. Tourism showed a distinct pick-up over the year. The surplus in invisible trade thus