- 5 -
Domestic demand
During the course of this year, there was a steady revival in consumer spending. Total retail sales rose by 2.5% in volume terms in the third quarter of 1996 over a year earlier, led by significant growth in the purchases of consumer durables and motor vehicles, at 12.1% and 20.2% respectively in volume terms.
The growth in overall investment spending was generally sustained in the third quarter of 1996, though at a relatively less rapid rate than in the preceding two quarters. Activities related to the major infrastructural projects, particularly those under the ACP, remained intensive. But growth should have tapered as the ACP had already reached its peak. The Public Housing Programme maintained its momentum. Also, the revival in the residential property market should have led to increased output from private building projects. Meanwhile, the on-going process of automation, mechanisation and office computerisation continued to support growth in spending on machinery and equipment.
The labour sector
Labour market conditions continued to improve in recent months. The seasonally adjusted unemployment rate came down to 2.6% in the third quarter, from 3.2% in the first quarter and 3.1% in the second quarter. The underemployment rate likewise fell further, to 1.4% in the third quarter, from 2.0% in the first quarter and 1.8% in the second quarter. The proportion of the employed population working longer hours also stayed at a high level.
Employment in most of the major service sectors expanded further in June 1996. The only exception was the wholesale and import/export trades. The decline was concentrated in the import/export trade, affected by the more moderate trade growth so far this year. Employment in the local manufacturing sector continued to be dampened by the progressive relocation of labour-intensive processes across the border and the weak performance of domestic exports in recent quarters.
Vacancies in the private sector remained on a downtrend in June 1996, although the rate of decline had come down most recently. This trend should nevertheless be viewed against the concurrent pick-up in employment and the fall in numbers unemployed in recent quarters.
Earnings in most of the major sectors continued to show respectable growth both in money terms and in real terms. Combining all the major sectors surveyed, earnings as measured by payroll per person engaged were 11% higher in money terms or 4% higher in real terms in the second quarter of 1996 over a year earlier.