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MONDAY, SEPTEMBER 12, 1977
STRONG DOMESTIC ECONOMIC ACTIVITY IN 1977
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CONSUMPTION AND INVESTMENT ARE PROVIDING THE MAIN IMPETUS TO GROWTH IN THE HONG KONG ECONOMY SO FAR IN 1977.
THIS STRONG DOMESTIC ECONOMIC ACTIVITY IS SPELT OUT IN DETAIL IN THE GOVERNMENT'S HALF-YEARLY ECONOMIC REPORT RELEASED TODAY.
THE REPORT, WHICH REVIEWS EVENTS UP TO THE FIRST HALF OF 1977, WILL SHORTLY BE ON SALE.
IT POINTS OUT THAT CONSUMPTION AND INVESTMENT EXPENDITURE, INFLUENCED BY THE RAPID INCREASE IN INCOMES LAST YEAR, HAVE BEEN STRONG BUT HAVE COINCIDED WITH A WEAK EXPORT PERFORMANCE.
THIS HAS PREVENTED THE COST/PRICE STRUCTURE FROM DEFLATING TOO RAPIDLY IN RESPONSE TO SLOWED DOWN EXPORTS, THE REPORT SAYS. AS ILLUSTRATIONS, THE REPORT POINTS TO THE FACT THAT WAGES HAVE CONTINUED TO INCREASE AND UNEMPLOYMENT HAS BEEN MAINTAINED AT THE RATHER LOW LEVEL OF ABOUT 4.5 PER CENT.
THE REPORT, HOWEVER, ADDS THAT A SITUATION OF STRONG DOMESTIC DEMAND COMBINED WITH WEAK PERFORMANCE IN EXPORTS IS NOT SUSTAINABLE BECAUSE +A WEAK PERFORMANCE IN EXPORTS, THE SIZE OF WHICH IS OF THE SAME ORDER OF MAGNITUDE AS THE GROSS DOMESTIC PRODUCT, WILL CERTAINLY CAUSE THE GROWTH OF INCOMES, AND HENCE OF DOMESTIC DEMAND, TO SLOW DOWN+.
THIS IS CONSISTENT WITH THE VIEWS EXPRESSED BY
MR. PHILIP HADDON-CAVE, THE ACTING CHIEF SECRETARY, IN A SPEECH DELIVERED TO THE HONG KONG MANAGEMENT ASSOCIATION LAST FRIDAY EVENING.
THE WEAK PERFORMANCE IN HONG KONG'S EXPORTS APPEARS TO BE CAUSED BY HIGH STOCK LEVELS, IN PARTICULAR FOR CLOTHING, BEING RUN DOWN IN HONG KONG'S PRINCIPAL MARKETS.
THIS POSSIBILITY IS BORNE OUT BY THE FACT THAT CONSUMER DEMAND IN THESE MARKETS HAS NOT SLOWED DOWN AS MUCH AS HONG KONG'S EXPORT PERFORMANCE IN 1977 WOULD SUGGEST.
FOR CLOTHING AND TEXTILE PRODUCTS, AS HONG KONG IS NOT SO PRICE COMPETITIVE AS SOUTH KOREA, A MOVE TO DEPLETE STOCKS OF TEXTILES AND CLOTHING TENDS TO HIT HONG KONG FIRST, THE REPORT POINTS OUT. AND, THE SITUATION FOR TEXTILE AND CLOTHING IN 1977 HAS BEEN FURTHER COMPLICATED BY THE RE-NEGOTIATION OF THE MULTI-FIBRE ARRANGEMENT DUE TO EXPIRE AT THE END OF THIS YEAR.
THE REPORT SHOWS THAT THE VALUE OF DOMESTIC EXPORTS FOR THE FIRST HALF OF THIS YEAR AT HK$ 15,776 MILLION, WAS SOME 7 PER CENT HIGHER THAN EXPORTS IN THE CORRESPONDING HALF IN 1976.
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