Hong Kong's July retail sales down 2.8% to $37.6b

Again, visitor spending was weak.

According to Barclays, Hong Kong retail sales in July were at HK$37.6 bn, down 2.8% y/y by value. This data lagged Bloomberg estimates of a 1.2% y/y decline and was weaker than the 0.4% y/y decline in June and the 1.6% y/y decline during 1H15. July retail sales volume was up 1.9% y/y, slower than June's up 4.4% y/y.

Barclays analysts believe local sentiment remained resilient but visitor spending was weak as visitor arrivals were down y/y. Jewellery and watches segment saw a smaller decline in July, while clothing and footwear, department stores and medicines/cosmetics segments saw a wider y/y decline in July. Food and consumer durables sales continued to be resilient.

Here's more from Barclays:

Visitor arrivals from mainland China down 10% y/y in July, worse than the 2% y/y decline in June: Overnight visitors lead the decline, down 15% y/y (vs. a 7% y/y decline in June); the number of same-day visitors was also down 6% y/y (vs. growth of 2% y/y in June).

Jewellery and watches saw a smaller decline of 5.0% y/y in July: This is better than the 10.4% decline seen in June.

Department stores sales were down 7.3% y/y in July: This is wider than the 3.3% y/y decline seen in June.

Clothing and footwear sales saw a 12.3% y/y decline in July: This is a wider than the 4.3% y/y decline seen in June.

Medicines and cosmetics sales declined by 5.4% y/y in July: This is slightly below the 4.2% y/y decline seen in June.

Food, alcohol and tobacco; and consumer durables sales continued to see growth: Sales for food, alcohol and tobacco saw stronger growth of 7.0% y/y in July, higher than the 3.4% y/y growth seen in June. Consumer durables sales growth at 11.7% y/y in July, following the 21.8% y/y growth seen in June.

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.