ENG-2018 — Page 68

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The Economy

Total exports of goods grew moderately for 2018 as a whole following the strong growth in 2017. However, the notable growth in the first three quarters was followed by a virtual halt in the fourth quarter, as the global economic growth momentum eased and the elevated Mainland-US trade conflict took its toll. Exports to many major markets recorded decelerated growth or even declines in the fourth quarter.

Exports of services grew solidly for 2018 as a whole, faster than the moderate growth in 2017. Growth picked up in the first half of 2018, before slowing noticeably in the second half. Underpinned by a surge in visitor arrivals, exports of travel services registered the strongest annual growth since 2013 despite the visible deceleration in the second half due to softer per capita visitor spending. Exports of financial services grew notably, thanks to the particularly strong growth in the first half amid buoyant cross-border financial activities. Exports of transport services and business and other services saw only modest growth.

Domestic demand was broadly resilient. Private consumption expenditure maintained notable growth for 2018 as a whole on the back of solid gains in wages and earnings, but the growth rate eased successively through the year amid asset market corrections. Investment expenditure grew modestly for another year, within which machinery and equipment acquisition expanded visibly while building and construction expenditure recorded a marginal decline.

The labour market showed further tightening in 2018 on the back of another year of above-trend economic growth. The unemployment rate for 2018 as a whole declined to 2.8 per cent, while the underemployment rate edged down to 1.1 per cent, both being the lowest in more than 20 years. Under the tight labour market conditions, wages and earnings continued to post solid growth, translating into real gains across most of the major sectors.

The residential property market remained buoyant in the first half of 2018, but underwent a consolidation in the second half. While the tight demand-supply balance of flats continued to render support, market sentiment was dampened by various uncertainties, including the Mainland-US trade tensions, continued US interest rate hikes and subsequent increase in local Best Lending Rates in September, and volatility in the global stock markets. Trading activities quietened down in the second half of 2018. Flat prices registered a decline from August, though still recording a gain of 2 per cent for the whole year.

Local stock prices underwent a sharp correction from early 2018 in the face of concerns about the US interest rate hikes, Mainland-US trade tensions and, later, the moderating global economic growth. The Hang Seng Index closed the year at 25,846, 22 per cent lower than its peak of 33,154 in January.

Consumer price inflation went up amid the above-trend growth. Underlying consumer price inflation accelerated from 1.7 per cent in 2017 to 2.6 per cent in 2018, remaining at a moderate level.

Structure and Development of the Economy

Hong Kong is a global centre for world trade, finance, business and telecommunications, located strategically at the doorstep of the Mainland's huge and vibrant economy. According to

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