ENG-2007 — Page 92

52 The Economy

Chart 8

Hong Kong's invisible trade (year-on-year rate of change in real terms)

Per cent

20

15

10-

5

0

-5

Exports of services

Imports of services

-10

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Exports of services grew distinctly further in 2007, with appreciable growth across-the-board throughout the four quarters over the year.

With the surplus in the invisible trade account more than offsetting the deficit in the merchandise trade account, a sizeable surplus of $176.5 billion was recorded in the combined visible and invisible trade balance in 2007, equivalent to 5.6 per cent of the total value of imports of goods and services. This compared with the corresponding figure of $168.2 billion (equivalent to 5.9 per cent of the total value of import of goods and services) in 2006. The continued sizeable surplus is a reflection of Hong Kong's strong external competitiveness in the global economy.

Domestic demand

Domestic demand is progressively becoming a more important growth engine for the economy. Local consumption grew robustly in 2007, particularly evident in the second half of the year, on the back of rising income, a robust labour market and strong performance of the asset markets. Private consumption expenditure (PCE) grew by 7.8 per cent in real terms for 2007, up from the 6.0 per cent growth in 2006. This was also the fastest growth since 1993. Demand was especially strong in consumer goods and services.

Growth in investment remained firm at 4.2 per cent in 2007. Investment in machinery, equipment and software registered a 3.5 per cent growth in 2007, though less rapid than the blistering double-digit pace in the previous three years. Construction activities began to show some signs of stabilising in 2007, largely due to the rebound in private sector activities when their public sector counterparts remained lacklustre. According to the Quarterly Business Tendency Survey conducted