ENG-2008 — Page 92

52 The Economy

expenditure (PCE) grew by 1.8 per cent in real terms, in contrast to the robust 8.5 per cent growth in 2007.

Overall investment posted a contraction of 0.3 per cent in 2008, as compared to the 3.4 per cent growth in 2007. Investment in machinery, equipment and software registered some notable growth during most of 2008, before showing a distinct decline in the fourth quarter. Meanwhile, construction activities remained sluggish. After recording positive growth in the first quarter, expenditure on building and construction decreased in the following three quarters. The costs of ownership transfer also trended downward as the local property market cooled in the second half of the year. Business confidence ebbed in the latter half of the year, particularly in the face of the abrupt deepening of the global financial crisis. According to the Quarterly Business Tendency Survey conducted by the Census and Statistics Department during mid-December 2008 to mid-January 2009, large business establishments generally remained rather pessimistic about the near-term outlook (Chart 9).

Chart 9

Main Components of Domestic Demand (year-on-year rate of change in real terms)

Per cent

15

10

5

0

Private consumption expenditure

-5

Government

Investment expenditure

consumption

-10

in terms of gross domestic

fixed capital formation

expenditure

-15

-20

1998 1999 2000

2001 2002 2003 2004 2005 2006 2007

2008

Domestic demand saw a declining trend over the course of 2008.

The Labour Market

The labour market continued to perform well during the first eight months of 2008, but deteriorated sharply in the remainder of the year as the adverse impact of the global financial crisis became increasingly apparent. On the supply side, whereas the year-on-year labour force growth held broadly stable throughout 2008, the growth in labour demand slowed significantly in the latter part of the year. The seasonally adjusted unemployment rate fell to a 10-year low of 3.2 per cent in mid- 2008, but leapt to 4.1 per cent at year-end, with the number of unemployed rising to 141 300 (Chart 10).