ENG-1987 — Page 78

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THE ECONOMY

a sharp increase in vacancies was recorded over a year ago. The seasonally-adjusted unemployment rate dropped to an historic low of 1.8 per cent towards the middle of 1987, while the underemployment rate averaged around one per cent. During the fourth quarter, the seasonally-adjusted unemployment rate was 1.9 per cent and the underemployment rate was 1.0 per cent, compared with the corresponding rates of 2.2 per cent and 1.2 per cent in the same quarter in 1986.

Manufacturing output, as measured by the quarterly index of industrial production, was 19 per cent higher in the first three quarters of 1987 than in the same period in 1986. This compared with an increase of 16 per cent for 1986 over 1985. A major part of these increases in output was derived from a higher degree of capacity utilisation, more overtime work and the installation of new machinery, together with a general improvement in labour productivity.

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A comparison of September 1987 with the same month in 1986 shows that manufac- turing employment increased by 0.6 per cent to 875 300, while employment in the services sectors as a whole increased by six per cent to 1 175 200. Within the services sectors, employment in the wholesale, retail and import/export trades increased by seven per cent, that in restaurants and hotels by 0.5 per cent, and that in financing, insurance, real estate and business services by 10 per cent. Employment on building and construction (in- cluding civil engineering) sites rose by three per cent over this period, in line with the intensive building and construction activities. For the building and construction industry as a whole, employment (covering both site workers and non-site workers) increased by 11 per cent.

The strong economic growth and tight labour market conditions resulted in a marked increase in labour incomes. Employees in the manufacturing, trading and services sectors enjoyed a significant increase in earnings (measured by payroll per person engaged) both in money terms and in real terms during the 12 months ending September 1987. Over the same period, construction wage rates also rose substantially.

The Property Market

The property market remained active for most of 1987. The take-up rate was maintained at a high level. Notwithstanding an increased supply of new property in the private sector, vacancy rates for all major types of property remained low. Supported by rising incomes and relatively low mortgage rates, the demand for residential property was firm, partic- ularly for flats in well-planned estates with convenient transport access. However, as the prices of residential flats edged up further, there were signs of consolidation in the latter part of the year. Prices and rentals for commercial and industrial property, particularly for premises in favoured locations, rose significantly in 1987.

As many developers remained optimistic about the outlook of the property market, land prices were driven higher during most of 1987. Most lots put out at government auctions were favourably received, and in many cases the prices fetched were much higher than a year earlier.

The Financial Scene

The financial scene in Hong Kong during 1987 was characterised by a weakening of the Hong Kong dollar against the major currencies other than the US dollar, continuing popularity of unit trusts and, until the latter part of October, gradually rising interest rates and active stock and index futures markets.