ENG-2003 — Page 86

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THE ECONOMY

computer software rose by 6.1 per cent in real terms, reversing the 9.1 per cent decline in 2002.

On the other hand, building and construction output remained subdued in overall terms throughout the year. Expenditure on building and construction fell back by 6.9 per cent in real terms in 2003, after a modest increase by 1.2 per cent in 2002. On a year-on-year comparison, the decreases were 3.5 per cent, 8.4 per cent, 6.7 per cent and 9.3 per cent respectively in real terms in the four quarters of 2003. The slump was mostly attributable to a distinct fall-off in private sector building work, despite a rise in consents for new building projects during the year. The increase in private sector civil engineering work rendered only a marginal offset. Public sector expenditure on building and construction was also slack in the first half of the year, upon the winding down of work on the KCR West Rail and Ma On Shan Extension. Nevertheless, it regained some momentum in the second half of the year, upon commencement of several new infrastructural projects including the Hong Kong section of the Hong Kong-Shenzhen Western Corridor and the Deep Bay Link (Chart 9).

Chart 9

Main components of domestic demand (year-on-year rate of change in real terms)

Per cent

20

15

10

5

Investment expenditure in terms of gross domestic fixed capital formation

Government consumption expenditure

0

-5

Private consumption expenditure

-10

-15

-20

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Consumer spending suffered a severe blow in the second quarter of 2003 upon the impact of SARS. Yet it staged a distinct turnaround in the third and fourth quarters, as the SARS impact dissipated and as overall economic activity turned around. Overall investment spending also picked up in the latter part of the year, amidst renewed interest in acquisition of machinery and equipment. As to government consumption expenditure, there was only a modest growth amidst continued fiscal restraint.

Net Output or Value Added by Economic Activity

As reflected in quarterly GDP by major economic sectors at constant prices, net output or value added for all the service sectors taken together went higher by an