THE ECONOMY
these high-value items shrank sharply towards the end of the year. Growth in private consumption expenditure averaged 7 per cent in real terms in 1997, compared with a 5 per cent rise in 1996.
Gross domestic fixed capital formation, as an overall measure of investment demand, grew strongly by 13 per cent in 1997. This was even faster than the 12 per cent increase in 1996. Among the major components, investment spending on machinery equipment surged ahead, along with continued mechanisation and office automation in the economy, and the substantial intake of equipment for the new airport and the airport railway. Overall building and construction expenditure registered further growth, notwithstanding the gradual completion of projects under the Airport Core Programme, as there was a marked pick-up in building activity at private-sector sites. However, in parallel with the consolidation in the property market, private-sector building activity slackened towards the end of the year.
Chart 8
Per cent
18
16
14
12
10
8
6
4
2
0
1987
Private consumption expenditure
Main components of domestic demand (year-on-year growth rate in real terms)
Investment expenditure
in terms of GDFCF
Government consumption expenditure
52
1988
1989
1990
1991
1992 1993 1994 1995 1996 1997 In 1997, domestic demand was underpinned by continued strong growth in investment demand and a steady pick-up in consumer demand.
The Labour Market
For most of 1997, labour market conditions tightened along with a further pick-up in economic activity. There was however an easing in the fourth quarter, following the correction in the asset markets and slackening in local demand as the effect of the regional financial turmoil spread. The seasonally adjusted unemployment rate fell steadily from 2.6 per cent in the fourth quarter of 1996 to a low of 2.2 per cent in the third quarter of 1997, before rebounding to 2.5 per cent in the fourth quarter. The underemployment rate exhibited a broadly similar trend. It fell from 1.6 per cent in the fourth quarter of 1996 to a low of 1 per cent in the third quarter of 1997, before edging up to 1.3 per cent in the fourth quarter.
There was a further notable growth in total labour supply, due to a substantial inflow of returning emigrants and of immigrants from the Mainland. But this was