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The Economy
Total exports of goods grew only modestly in 2014, with a relapse to a slight decline in the fourth quarter, reflecting the lacklustre external trading environment. While the US economy displayed some strengthening during the year, the eurozone economy and Japan's economy still lacked momentum. Emerging market economies also slowed down by varying degrees, with emerging Asia faring better. Besides, the divergence of monetary policy stance among major central banks, heightened geopolitical tensions in various parts of the world as well as the plunge in oil prices all added headwinds to the financial market and foreign exchange markets, exacerbating the already unsteady external environment.
Exports of services eased visibly to grow only slightly in 2014, marking the slowest growth since 2009. The main drag stemmed from a fall-off in visitor spending on big-ticket items. Meanwhile, other services exports remained generally lacklustre, also affected by subdued global demand.
The domestic sector's growth momentum also softened in 2014. Private consumption expenditure saw only moderate growth. Investment expenditure slackened to a marginal decline, mainly due to the fall in machinery and equipment acquisition, which more than offset the rebound in building and construction activity.
The labour market remained in a state of full employment in 2014. Total employment growth. continued to outpace that of labour force, with the seasonally adjusted unemployment rate staying low at 3.3 per cent in the fourth quarter. Wages and earnings registered further gains.
The residential property market was relatively soft in the first quarter of 2014, but revived in April and stayed generally buoyant for the rest of the year amid the tight demand-supply balance and the continued low interest rate environment. Overall flat prices surged by 14 per cent between December 2013 and December 2014. Trading activities jumped by 26 per cent in 2014.
The local stock market continued to fluctuate during 2014. The local stock market came under pressure in early 2014, with the Hang Seng Index (HSI) reaching a low of 21,182 in March. But it gained support subsequently and rallied successively upon the signs of revival in the US economy, continued steadiness of the Mainland economy, expectations of the Shanghai-Hong Kong Stock Connect, and the continued accommodative stance by the US Federal Reserve (Fed) with the HSI hitting a six-year high of 25,318 in early September. Afterwards, the HSI lost ground again on jitters about the global economic outlook and oil price slump, closing the year at 23,605, slightly higher than at end-2013 by 1.3 per cent. The average daily turnover also rose markedly in the second half of the year, bringing an average of $69.5 billion for the whole year. Fund-raising activity continued to pick up in 2014 with total initial public offering (IPO) funds raised amounting to $233 billion in 2014, up remarkably from $169 billion in 2013. As a result, Hong Kong ranked as the world's second largest IPO centre for the second consecutive year in 2014.
Inflation eased further in 2014, as domestic cost pressures moderated, while imported inflation remained tame. In 2014, underlying inflation averaged 3.5 per cent, down from 4 per cent in 2013.
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