ENG-2010 — Page 98

56 The Economy

Chart 9

Hong Kong's Invisible Trade (year-on-year rate of change in real terms)

Per cent

20

18

16

14

12

10

8

6

4

2

0

-2

-4

-6

-8

-10

-12

-14

Exports of services

Imports of services

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2006

2007

2008

2009

2010

Exports of services sustained strong growth throughout 2010.

Domestic demand

The domestic sector expanded strongly in 2010. Local consumer sentiments stayed upbeat throughout the year, supported by improving job and income prospects, as well as the better performance of the asset markets. Private consumption expenditure (PCE) grew in real terms in all four quarters of 2010. For the year as a whole, PCE grew by 5.8 per cent, up strongly from the 0.6 per cent growth in 2009. On a seasonally adjusted quarter-to-quarter comparison, PCE also expanded throughout 2010. Meanwhile, government consumption expenditure grew steadily in 2010, by 2.7 per cent in real terms, following the 2.3 per cent growth in 2009.

Overall investment spending in terms of gross domestic fixed capital formation showed a notable 8.1 per cent growth in real terms in 2010, the fastest annual expansion after 1997. Private sector investment in machinery and equipment increased for 2010 as a whole, supported by growing business volumes and strong regional economic prospects. After a temporary slowdown in the third quarter, this investment picked up again in the fourth quarter. Indeed, business sentiments among large enterprises as shown by the Quarterly Business Tendency Survey conducted by the Census and Statistics Department generally stayed optimistic in 2010. On the other hand, small and medium enterprises (SMEs) turned somewhat cautious towards the year-end in view of the still elevated level of uncertainty in the external environment. The surge in public sector building and construction activities, driven by the expedition of public sector works and successive implementation of large-scale infrastructure projects, was also a major supporting factor behind the rapid increase in overall investment spending. However, private sector building and construction activity was still weak in 2010 (Chart 10).