ENG-1982 — Page 67

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FINANCIAL SYSTEM AND ECONOMY

1978 to 1981, showed little growth in 1982. Reflecting the weak consumer demand and investment demand in Hong Kong and the generally uncertain export prospects, imports in real terms dropped by 2.7 per cent. As the decline in the growth rate of the value of imports was relatively faster than that of the value of total exports, the visible trade gap (that is the proportion of the value of imports not covered by the value of total exports) narrowed. This represents an improvement over the previous year, when a widening in the visible trade gap was recorded.

A strengthening in the overall exchange value of the Hong Kong dollar in the first nine months of the year, coupled with a general softening of world commodity prices, caused the rate of increase in Hong Kong's import prices to slow down for much of the year. Moreover, while the gross domestic product grew by about 2.4 per cent in real terms, total final demand, after excluding the effect of entrepôt trade, showed no growth. This implies an easing of the pressure of aggregate demand in the economy on the general price level. Thus the rate of inflation, as indicated by the various Consumer Price Indexes, slowed down during the year, and wage rates for most employees, except for those in manufacturing, showed some improvement in real terms.

Labour Market

In Hong Kong, wage rates are determined by conditions in the labour market. During the year, the growth rate of the labour force remained relatively stable, as the influx of immigrants, which had been very substantial during the previous few years, abated. However, the labour force participation rate, which declined in the first part of the year, increased again in September 1982. As a result, the growth rate of the labour force picked up slightly in the second half of 1982. Because the growth rate of the supply of labour was slightly higher than the growth rate of the demand for it, the seasonally adjusted unemployment rate, which had been decreasing throughout 1981, increased, reaching 3.5 per cent in March 1982 and 4.0 per cent in September. Under-employment also increased.

As the size of the employed labour force remained largely unchanged, economic growth in 1982 represents generally an increase in labour productivity, defined as GDP per person employed. In part the increase in productivity reflected the relative shift in activity in the economy from the manufacturing sector to the tertiary services sectors. Consistent with the performance of domestic exports, employment in the manufacturing sector showed a net decrease during the year. The fall in employment in the manufacturing sector and on building and construction sites was, however, largely offset by an increase in employment in the tertiary services sectors.

Due to the slowing down in the rate of increase of consumer prices and to the more stable growth rate of the labour force, wage rates in the manufacturing sector showed some improvement in real terms in the first half of the year. But as the economy continued to adjust to the effects of the economic recession, there was a slight decrease in manufacturing wage rates in real terms in the second half. Taking the 12 months ending September 1982, wage rates recorded a slight decline of 1.0 per cent in real terms, compared with an increase of 2.3 per cent for the 12 months ending September 1981. There was, however, an increase in real terms for salaries in the tertiary service sectors. Construction wage rates also rose slightly in real terms. Together with the relatively stable prices of building materials such as cement and steel bars, the increase in building and construction (including civil engineering) costs in 1982 was moderate.