XN000022-1982-11-25 — Page 2

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THURSDAY, NOVEMBER 25, 1982

INTERNAL COST/PRICE STRUCTURE ADJUSTING TO WORLD RECESSION

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THE GOVERNMENT TODAY PUBLISHED THE THIRD QUARTER ECONOMIC REPORT 1982, THE REPORT UPDATES THE ANALYSIS IN THE HALF-YEARLY ECONOMIC REPORT PUBLISHED IN AUGUST, AND REVIEWS DEVELOPMENTS IN THE ECONOMY IN THE THIRD QUARTER.

THE REPORT NOTES THAT THE PERFORMANCE OF THE HONG KONG ECONOMY SO FAR THIS YEAR HAS BEEN MUCH AFFECTED BY THE PRESENT WORLD RECESSION. THERE HAS BEEN A DELAY IN THE RECOVERY OF THE ECONOMIES OF HONG KONG'S EXPORT MARKETS, IN PARTICULAR THE UNITED STATES. AS A RESULT, THE FORECAST GROWTH RATE OF THE GROSS DOMESTIC PRODUCT FOR HONG KONG IN 1982 WAS REVISED DOWNWARDS IN SEPTEMBER TO FOUR PER CENT IN REAL TERMS.

THE EXPORT SECTOR HAS REMAINED RATHER WEAK THROUGHOUT THE PAST YEAR, AS EVIDENCED BY THE DECLINES IN REAL TERMS IN THE RETAINED IMPORTS OF RAW MATERIALS AND SEMI-MANUFACTURES AND OF CAPITAL GOODS, IN THE VOLUME OF ORDERS HELD BY LARGE MANUFACTURERS, AND IN MANUFACTURING EMPLOYMENT, THE TERTIARY SERVICES SECTORS, HOWEVER, HAVE CONTINUED TO GROW,

IN CONSEQUENCE, THE OVERALL EMPLOYMENT SITUATION HAS BEEN FAIRLY STABLE. THE SEASONALLY ADJUSTED UNEMPLOYMENT RATE WAS 3.4 PER CENT IN JUNE. BUT THERE ARE INDICATIONS THAT UNEMPLOYMENT HAS RISEN SINCE THEN.

ON A BRIGHTER NOTE, THE REPORT POINTS OUT THAT THE UNDERLYING RATE OF INFLATION CONTINUED TO SLOW DOWN IN THE THIRD QUARTER. TOGETHER WITH THE GENERAL DECLINE IN LOCAL INTEREST RATES AND THE FURTHER EASING OF PROPERTY PRICES AND RENTALS, THEY INDICATE A RELATIVELY DEFLATED INTERNAL COST/PRICE STRUCTURE AND THE EXISTENCE OF SOME SPARE CAPACITY. THE ECONOMY THUS APPEARS WELL PLACED TO BENEFIT FROM A REVIVAL IN EXPORT DEMAND WHEN THE ECONOMIC RECOVERY OF HONG KONG'S MAJOR TRADING PARTNERS GETS UNDERWAY.

APART FROM GIVING AN OVERALL VIEW, THE REPORT ALSO CONTAINS INDIVIDUAL CHAPTERS ON THE EXTERNAL SECTOR, THE FINANCIAL SECTOR, THE LABOUR SECTOR, ACTIVITY IN SELECTED SECTORS AND PRICES.

ON THE EXTERNAL SECTOR, THE REPORT INDICATES THAT HONG KONG'S EXPORTS REMAINED SLUGGISH IN THE THIRD QUARTER, DUE TO THE WEAK DEMAND FROM HONG KONG'S MAIN MARKETS. DOMESTIC EXPORTS IN THE THIRD QUARTER SHOWED A YEAR-ON-YEAR GROWTH RATE OF ONLY ONE PER CENT IN VALUE TERMS OR A DECLINE OF FIVE PER CENT IN REAL TERMS. FOR THE FIRST NINE MONTHS AS A WHOLE, THE DECLINE WAS THREE PER CENT IN REAL TERMS.

THE REPORT FURTHER NOTES THAT IMPORTS SHOWED A YEAR-ON-YEAR DECLINE OF ONE PER CENT IN REAL TERMS IN THE THIRD QUARTER, MAKING A TOTAL DECLINE OF THREE PER CENT IN REAL TERMS FOR THE FIRST NINE MONTHS OF 1982, HOWEVER, WITH A SHARP DECELERATION IN THE GROWTH RATE OF RE-EXPORTS, RETAINED IMPORTS SHOWED A MARGINAL INCREASE OF ONE PER CENT IN REAL TERMS IN THE THIRD QUARTER.

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