THE ECONOMY
average of 3.7 per cent in real terms in the first three quarters of 2003 over a year earlier, slightly exceeding the 3.5 per cent gain in 2002. Analysed by constituent sector and on a year-on-year comparison in real terms, net output in the wholesale, retail and import/export trades, restaurants and hotels rose strongly by 9.5 per cent in the first three quarters of 2003. This was attributable to a marked increase in net output in the import/export trade, more than offsetting the declines observed in the wholesale and retail trades and in restaurants and hotels owing to the SARS impact in the second quarter. Meanwhile, net output in financing, insurance, real estate and business services moved up by 3.6 per cent, mainly underpinned by improved performance of banking services and also buoyancy in stock brokerage amidst an upsurge in stock market turnover. On the other hand, net output in transport, storage and communications as well as in community, social and personal services shrank by 0.2 per cent and 1.0 per cent respectively. These largely reflected the downturn in air and land transport services and in recreation and entertainment services, upon the spread of SARS in the second quarter.
Net output in the local manufacturing sector was reduced distinctly, by an average of 10.2 per cent in real terms in the first three quarters of 2003 over a year earlier, further to a 9.8 per cent fall in 2002. The weak performance of domestic exports and ongoing relocation of production processes outside Hong Kong largely contributed. As to the construction sector, net output dropped by an average of 4.3 per cent in real terms in the first three quarters of 2003 over a year earlier, after a 0.8 per cent fall in 2002. This was mainly due to winding down of some major railway projects earlier in the year and generally slack building activity.
The Labour Market
The labour market slackened visibly in the first half of 2003, but underwent a progressive improvement in the second half, as the economy recovered from the severe setback inflicted by SARS earlier in the year. Indicative of this, the seasonally adjusted unemployment rate rose from 7.2 per cent in the fourth quarter of 2002 to 7.5 per cent in the first quarter of 2003, and markedly further to 8.6 per cent in the second quarter and then to a peak of 8.7 per cent in May-July. Nevertheless, along with the upturn in economic activity, the seasonally adjusted unemployment rate fell back to 8.3 per cent in the third quarter and notably further to 7.3 per cent in the fourth quarter. For 2003 as a whole, the unemployment rate averaged 7.9 per cent, which however was still considerably higher than that in 2002, at 7.3 per cent. Furthermore, there was a clear lengthening in the median duration of unemployment, from 90 days in the fourth quarter of 2002 to 109 days in the fourth quarter of 2003, as well as a surge in the proportion of persons unemployed for six months or more, from 30 per cent to 36 per cent.
The underemployment rate exhibited a broadly similar profile. It jumped to a peak of 4.3 per cent in the second quarter of 2003, after a modest decline from 3.1 per cent in the fourth quarter of 2002 to 2.9 per cent in the first quarter of 2003. Conceivably, this was due to a significant proportion of employees having been temporarily suspended from work or asked to take no-pay leave during the SARS period. Yet as SARS waned and the affected employees gradually returned to their jobs, the underemployment rate came down again, to 3.6 per cent in the third quarter and further to 3.3 per cent in the fourth quarter. For 2003 as a whole, the underemployment rate averaged 3.5 per cent, which however was also appreciably above that in 2002, at 3.0 per cent (Chart 10).
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