September retail sales values beat market expectations with 4.1% contraction

Consumer durable goods showed major improvement.

Hong Kong's retail sales surprised the market on the upside in September, with both sales values and volumes registering significantly narrower declines.

According to a research note from HSBC Global Research, sales values contracted at the slowest pace in close to a year, while sales volumes posted the smallest fall since February 2016.

The most notable improvements came from the sales of consumer durable goods which contracted at a much slower pace, after registering steep double digit falls since the start of the year. In particular, sales of electronic products fell much less sharply, followed by miscellaneous durable goods.

Given the lack of more detailed breakdown it is difficult to know exactly what products these represent. If they were related to the tech product launches, however, then the effect may fade in a few months' time.

Here's more from HSBC Global Research:

Meanwhile, overall tourist arrivals contracted a slower pace of -3.0% y-o-y (vs. -9.0% in August). Given the low base from last year, the slowdown in inbound tourism may be past the worst, but overall arrivals are still contracting. Visitors from Mainland China, which account for over 70% of total traffic, are still slowing at a faster rate than overall tourist arrivals.

Therefore despite the improvement in September, the outlook over the rest of the year may remain challenging. Indeed, with a year-end Fed hike now looking more likely than before, it is possible that this will put more near term pressures on tourist arrivals (given the strength of the HKD) as well as domestic consumption.

September retail sales values came in above market expectations , contracting at a slower pace of 4.1% y-o-y compared with -10.5% in August ( Bbg: -9.0%, HSBC: -9.0%). Also, retail sales volumes also came in above market expectations, contracting at a slower pace of 3.9% y-o-y, compared with an upwardly revised contraction of 11.0% y-o-y in August ( Bbg: -10.5%, HSBC: -10.0%).

September sales values of jewellery, watches and clocks and valuable gifts contracted by 12.3% y-o-y , while sales volumes were down 17.3% y-o-y (vs. -26.5% and -32.0% respectively in August). Consumer durable goods sales values were down 9.3% y-o-y in September, compared with a contraction of 23.8% in August, while sales volumes fell 3.6% y-o-y compared with a contraction of 20.0% in August.

Sales values of clothing, footwear and allied products rose by 1.5% y-o-y, compared with a contraction of 4.5% in August. Sales volumes were up 4.4% y-o-y from 0.2% in August. The sales values of food, alcoholic drinks and tobacco contracted by 3.1% y-o-y, down from a previous 8.8% y-o-y rise. Sales volumes were down 5.1% y-o-y, compared with a previous 6.7% y-o-y rise.