56 | The Economy
and 5.7 per cent respectively. While private sector building activity was dampened by the earlier sluggishness in the property market, public sector output was dragged down by the further shrinkage in works under the Public Housing Programme and the completion of several priority railway projects, including West Rail, the KCRC East Rail extension to Tsim Sha Tsui and Ma On Shan Rail (Chart 9).
Chart 9
Main components of domestic demand (year-on-year rate of change in real terms)
20
Per cent
15
10
5
0
-5
Private consumption expenditure
-10
-15
-20
Government
consumption expenditure
Investment expenditure
in terms of gross domestic fixed capital formation
!
1994
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Local consumer spending maintained notable growth throughout 2004, underpinned by optimism over the economic outlook, improving labour market conditions, the wealth effect stemming from the rebound in property prices, and buoyancy in inbound tourism. Overall investment spending also strengthened as the activity upturn and brighter business outlook prompted a broad-based surge in machinery and equipment investment to fuel business growth.
Net Output or Value Added by Economic Activity
As reflected in GDP by major economic sector at constant prices, net output or value added for all the service sectors taken together grew markedly by an average of 8.8 per cent in real terms in 2004 over a year earlier, almost double the 4.5 per cent gain in 2003. Sustained recovery in local consumer demand, robust trade performance and vibrant inbound tourism were the major contributory factors. Analysed by constituent sector and in real terms, net output in transport, storage and communications rose most sharply, by 17 per cent in 2004, backed by a surge in merchandise trade flows amid vibrant global demand and by a continued proliferation of the telecommunications industry particularly of mobile phone and international telephone services. Meanwhile, net output in the wholesale, retail and import/export trades, restaurants and hotels also registered robust growth, at 13.3 per cent. Continued recovery in local consumer demand, remarkable trade performance, and resurgence in inbound tourism all contributed. Meanwhile, net output in finance, insurance, real estate and business services recorded an 8 per cent