Here's what to blame for Hong Kong's slower economy in 3Q

GDP expanded by 2.9%.

According to Bank of America Merrill Lynch, Hong Kong's 3Q13 GDP advanced 2.9% year-on-year, slower than the revised growth rate of 3.2% in 2Q13, dragged by weaker private consumption, slower fixed investment and moderating exports of services.

In quarter-on-quarter (qoq) seasonally adjusted terms, the economy grew 0.5% in 3Q13, down from 0.7% growth in 2Q13.

Here's more:

Services exports slowed on sluggish trade-related services

Exports of services moderated to 4.9% yoy in 3Q13, from 8.4% yoy in 2Q13, much lower than trend growth at about 9.7% yoy. The deceleration was caused by the tepid growth in exports of trade-related services (0.3% yoy vs. 1.8% yoy in 2Q13) and those of transportation services (0.8% yoy vs. -1.6% yoy in 2Q13) due to the generally weak and still volatile trade environment.

Nevertheless, exports of travel services (13.6% yoy vs. 29.8% yoy in 2Q13) remained the key driving force, thanks to the further increase in inbound tourism. Exports of financial and other business services also witnessed solid growth amid further expansion of cross-border financial activities.

Looking ahead, tourists will probably stay selective in their spending and their interests in luxury goods like jewelry and watches may remain restrained given the structural economic slowdown in Mainland.

Goods exports stayed stable, helped by exports to EU

Total exports of goods rose by 6.2% yoy in 3Q13, same as the gain last quarter, in part boosted by still substantial increase in exports of non-monetary gold. On a qoq seasonally adjusted basis, total exports of goods rebounded by 3.1% in 3Q13. Excluding this factor, growth in merchandise export performance was rather lackluster.

The advanced markets continue to be the weak spots, as exports to the US and Japan post further yoy declines in 3Q13. Nevertheless, exports to the EU saw a mild yoy growth, helped by the gradual recovery in Europe.

Meanwhile, we witness a modest growth in exports to China while exports to major Asian markets remain mixed. The crackdown on fake trade in China earlier this year may continue to have a minor downward impact on HK's export figures but we expect the effect to unlikely be huge.