Hong Kong's GDP to edge up to 2.6%

Private consumption to lead growth.

According to DBS, GDP growth for 1Q13 will be announced this Friday. Headline growth is projected to accelerate 2.6% YoY (1.2% QoQ sa) from 2.5% (1.2% QoQ sa) in 4Q12. Private consumption (PCE) – accounting for over 60% of GDP – will likely spearhead growth in 1Q13. 

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Growth in PCE probably jumped 5.9% in realterms in 1Q from 4.1% in 4Q12 on the back ofimproving retailsalesfigures which have clearly made a comeback since 3Q12. Locals’spending (using a proxy derived from total sales minus popular tourist items) improved, rising 13.7% in 1Q13 versus 6.7% in 4Q12 on the back of a healthy labor market.

On the trade front, nominal merchandise exports and imports grew 3.9% and 4.9% respectively in 1Q, versus 7.0% and 8.1% in 4Q12. The merchandise trade deficit has managed to narrow slightly (USD 14.2bn in 1Q vs. USD 17.4bn in 4Q12).

In real terms, exports and imports of goods and services will likely advance 4.0% and 5.1% in 1Q,from 5.0% and 6.4% in 4Q.