Hong Kong retail sales take 5.4% y/y dip in August

Visitor spending believed to have been weak.

Hong Kong retail sales in August were at HK$37.9bn, down 5.4% y/y by value.

According to a research note from Barclays, this data was weaker than the 2.9% y/y decline in July and the 0.4% y/y decline in June, but was above the Bloomberg estimate of a 6.9% y/y decline.

August retail sales volume was down 0.2% y/y, slower than July, which was up 1.9% y/y. Barclays believes local sentiment remained resilient but visitor spending was weak.

The food segment saw a 10.2% y/y decline, reversing the 10-month consecutive y/y growth trend previously. The y/y decline in the jewellery/watches segment and department stores widened in August, while the decline in the clothing/footwear and medicines/cosmetics segments narrowed marginally in August.

Here's more from Barclays:

Visitor arrivals from mainland China down 7% y/y in August, vs. a 10% y/y decline in July: Visitors under the Individual Visitor Scheme led the decline, down 18% y/y (vs. a 17% y/y decline in July). The number of same-day visitors and overnight visitors both declined by 7% y/y in August.

We continue to be negative on the Hong Kong retail environment, and expect slow sales growth in Hong Kong over the next few years as: 1) we expect higher spending visitors to continue to diverge to other travel destinations, particularly destinations with depreciated currencies; and 2) we believe Hong Kong’s product pricing advantage could also diminish if the USD continues to be relatively strong and if China at some point removes more import tariffs or consumption taxes for more goods in China.

Major categories in August: Jewellery and watches saw a wider decline of 8.8% y/y in August: This compares to the 5.0% decline in July. Department stores sales were down 8.6% y/y in August: This is wider than the 7.3% y/y decline in July. Clothing and footwear sales saw a 12.0% y/y decline in August: This is slightly better than the 12.4% y/y decline in July.

Medicines and cosmetics sales declined 5.1% y/y in August: This is similar to the 5.4% y/y decline in July. Food, alcohol and tobacco reversed their growth trend, declining y/y; consumer durables sales continued to see growth: Sales for food, alcohol and tobacco reversed their 10-month consecutive growth trend, declining 10.2% y/y in August, compared to 7.2% y/y growth in July. Consumer durables sales growth was at 9.5% y/y in August, slower than the 11.5% y/y growth in July.