ENG-2002 — Page 84

THE ECONOMY

value of imports of goods and services in 2002, from $68.5 billion or 3.9 per cent in 2001 (Chart 10).

Chart 10

Per cent

15

10

5

0

Hong Kong's invisible trade

(year-on-year rate of change in real terms)

Exports of services

Imports of services

-5

1992 1993 1994 1995 1996

1997 1998 1999 2000 2001

2002

Exports of services rose at a more rapid pace in 2002 than in 2001, underpinned by a broad-based surge in inbound tourism, offshore trade and transportation services. Imports of services only recorded modest increases in both years.

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Domestic Demand

Local consumer spending remained subdued in most of 2002, as consumers' willingness to spend was held back by high unemployment, moderated income, and weak asset prices. Even with the support of a significant upsurge in inbound tourism in the year, the volume of retail sales still contracted by 2.6 per cent in 2002, after a 1.2 per cent increase in 2001. A relative improvement in retail business nevertheless emerged in the latter part of the year, upon steadier employment conditions and an even stronger surge in incoming visitors. Private consumption expenditure (PCE) likewise dropped in 2002, though to a lesser extent than the decline in retail sales, as the sustained growth in spending on consumer services cushioned the setback in spending on goods. On a year-on-year comparison, PCE fell in all four quarters of 2002, by 0.1 per cent, 2.2 per cent, 1.2 per cent and 1.8 per cent respectively in real