ENG-2019 — Page 82

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The Economy

Compiled based on the change of ownership principle, the goods deficit narrowed markedly in 2019, as imports fell more than exports. Over the same period, the services surplus shrank. As the reduced services surplus was still larger than the goods deficit, the combined goods and services account registered a surplus of $49 billion in 2019, in contrast to the deficit of $6 billion in 2018.

Domestic Demand

Domestic demand retreated in 2019. Private consumption expenditure fell 1.1 per cent in real terms for 2019 as a whole after growing 5.3 per cent in 2018, marking its first annual decline since 2003. Following modest growth in the first half, private consumption expenditure deteriorated sharply to record a year-on-year slump in the second half (chart 7), as the local social incidents with violence caused severe disruptions to consumption-related activities and dampened consumer sentiment already weakened by the subdued economic conditions. Meanwhile, government consumption expenditure grew solidly by 5.1 per cent in real terms in 2019, after expanding 4.2 per cent in 2018.

Chart 7

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

15

10

Per cent

Private consumption expenditure

5

O

-5

-10

-15

Government

consumption

expenditure

Investment expenditure in

terms of gross domestic

fixed capital formation

-20

T

T

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

I 2015 I

2016

2017

|

2018

2019

Private consumption expenditure deteriorated abruptly in the second half of 2019. Overall investment spending also plummeted.

Overall investment spending in terms of gross domestic fixed capital formation plummeted 12.3 per cent in real terms in 2019 after a 1.7 per cent growth in 2018, the biggest annual drop since 1999. Expenditure on acquisitions of machinery, equipment and intellectual property products plunged 20 per cent, as business sentiment became very pessimistic amid the heightened Mainland-US trade tensions and increasingly violent local social incidents. Building and construction expenditure fell 6.2 per cent. Private-sector building and construction activities went into a decline alongside worsening economic conditions. Public-sector building

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