40 The Economy
trade flows and the competitiveness advantage from the weakening of the Hong Kong dollar along with the US dollar, merchandise exports attained double-digit growth for the fourth year in a row, a testament to Hong Kong's well-established role as a trading and logistics hub in the region. Invisible trade was likewise robust, with exports of services registering another year of solid growth. Exports of merchandising and other trade-related services, financial and other business services, and transportation services all performed well, although exports of travel services showed more moderate growth due to the slower pace of expansion in inbound tourism in the second half of the year.
The domestic sector was an increasingly steady and important contributor to Hong Kong's economic growth in 2006. Local consumption demand grew solidly throughout the year as the labour market continued to show a broad-based improvement while the asset markets performed equally well to produce a positive wealth effect. Apart from sanguine economic prospects, consumer sentiment was generally upbeat more so with reduced uncertainty over interest rates in the latter part of the year. Overall investment picked up in 2006 for the fourth year in a row. Investment strength was propelled mainly by a sustained surge in machinery and equipment acquisition, a clear indication of investor confidence against the backdrop of a briskly expanding economy, although overall activity in the construction industry remained slack.
The labour market experienced further extensive improvements in 2006. Total employment recorded a 2.1 per cent growth in 2006, slightly higher than the 2.0 per cent increase in 2005. The number of people employed in 2006 was 3.47 million, representing an all-time high. An additional 299 000 new jobs were created between the 2003 trough and end-2006, benefiting workers in all age groups and all occupation categories. In tandem with this growth, the seasonally adjusted unemployment rate fell to a six-year low of 4.4 per cent.
The overall property market, after a general upturn between mid-2003 and mid- 2005, showed a steadier performance in 2006. Probably
Probably reflecting greater risk awareness, most property prices rose at a slower rate amid moderate trading. Despite this, market sentiment remained positive as the longer-term outlook was well underpinned by improving economic fundamentals. On the leasing front, rentals kept moving up extensively in tandem with solid user demand, but increases in residential flats and shopping space slowed down noticeably after earlier surges.
In the financial market, the local stock market was on an upward trend during most of 2006, benefiting much from being a platform for overseas investors investing in the fast-growing Mainland market as well as for Mainland enterprises to raise capital around the world. Activities involving Initial Public Offerings (IPOs), including the listing of several prominent Mainland enterprises, attracted much interest. In terms of funds raised through IPOs, Hong Kong ranked second in the world in 2006, just after London. The Hang Seng Index broke the 20 000 mark for the first time in