TNAG-1603-FCO40-2210-Future-of-Hong-Kong-annual-reports-to-Parliament-on-Hong-Kon-1987 — Page 223

VIII. PERFORMANCE OF THE ECONOMY

(a)

General Situation

42.

Led by a strong recovery in domestic exports since March,

1986 saw a marked upturn in the Hong Kong economy. Domestic exports

grew by 13% in

in real terms,

in the first nine months of 1986, over

as

a

same period last year, in contrast with a decline of 5% in 1985

This recovery was

to attributable partly

whole.

improved

demand for Hong Kong's products in many of its major overseas markets, and partly to improved external competitiveness caused by

the depreciation of the Hong Kong dollar against most major currencies, in line with the depreciation of the US dollar under the linked exchange rate system. For the first nine months of 1986

re-exports grew by about 7% in real terms.

43.

helped

to

In

The strong recovery in domestic. exports has maintain employment at a high level and to boost Labour incomes. the third quarter of 1986, the seasonally-adjusted unemployment rate was 2.8% and the underemployment rate was 1.3%. Employment continued to grow particularly in the financial and other business services sectors and in the distributive trades. Earnings in most

increased significantly both sectors

terms and in real

terms.

in money

44.

In Line with the improved economic

demand has also

conditions,

reflected

as up,

private

by

consumption

firmed

the

relatively high growth rates of retained imports of consumer goods and of foodstuffs, at 9% and 11% respectively in real terms in the

first nine months of 1986.

45.

Except for one or

two temporary aberrations the exchange rate of the Hong Kong dollar against the US dollar has remained stable around the linked rate of HK$7.80 to US$1 during the year. However reflecting the depreciation of the US dollar, the effective exchange rate index of the Hong Kong dollar fell from 70.6 in end-Deceab 1985 to 64.8 in end-December 1986.