Hong Kong to report strongest quarterly growth since 2011 in 4Q: Hang Seng Bank

But it warns that it doesn't mean the economy's taking off.

The fourth-quarter GDP report will be released along with the annual budget. As always, the quarterly GDP figures will highlight a range of issues and trends impacting the economy.

There are several key points about the GDP data. Hang Seng Bank economist Ryan Lam notes that first, the most encouraging aspect appears to be a recovery in exports, as a result of the rebound in final demand in the developed world.

Second, the domestic economy, he said, has weathered numerous exogenous factors reasonably well. "Private consumption has probably bottomed out, underpinned by solid income growth as well as positive wealth effects from buoyant home prices. Based on data available through December, we calculate that last quarter’s private consumption to advance 3.6%."

The pace of GDP growth is estimated to have picked up to 2.6% in 4Q12 from 1.3% in 3Q12, which would be the strongest since 4Q11, said Lam.
 

Beyond the headline numbers, Lam said that the composition of GDP figures should reveal the following themes:

• Final demand continued to be the primary growth driver;
• Labour market remained tight;
• The housing boom was still driving capital expenditure higher;
• The broader price deflators stayed benign.

For the coming months, improvement in coincident indicators and reduced systemic risks in the US and Europe have given Hang Seng Bank some comfort in that the probability of the downside risks to city’s growth have been curtailed. That is, however, not to say that it envisages economic growth to take off.

"Economic challenges are plenty, including fiscal uncertainty in the US and continued implementation of austerity measures in Europe. Until the economic clouds are lifted, the local recovery remains on an arduous path ahead," said Lam.