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Partly affected by the exceptionally large increase in consumer spending in the first quarter of last year thereby giving a high base of comparison, the growth in private consumption expenditure should have slowed down further in the first quarter of this year.
The sluggish retail sales and the slower growth in retained imports of consumer goods also suggest a continued slack in consumption demand. Moreover, the recent upsurge in unemployment may have dampened consumer sentiment further.
On the other hand, the strong growth in external trade should continue to provide the primary source of income growth in Hong Kong as a highly externally oriented economy.
Pay surveys on the private sector also indicate a steady rise in income over the past year.
The rebound in the local stock market, coupled with improved sentiment in the property market, should also help the situation. Furthermore, the negative impact of the successive rises in interest rate may be expected to dissipate gradually during 1995.
In contrast to the past seven years when consumption growth was persistently above overall GDP growth, the forecast growth rate of private consumption expenditure for this year is now slightly below that of GDP and should be attainable.
The forecast growth rate of government consumption expenditure is raised slightly, from 4% to 4.5%. But this results entirely from a downward revision made to the Government's earlier expenditure figures for 1994/95.
On investment spending, the forecast growth rate in real terms of private sector expenditure on building and construction is lowered from 5% to 3%.
This downward revision mainly reflects the completion or winding down of work on a number of prominent building projects.
On the other hand, work on the major private sector civil engineering projects can be expected to remain intensive and should provide a partial offset to the slow- down in building works.
As to public sector expenditure on building and construction, the forecast growth rate in real terms is also revised downwards, from 30% to 20%.
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