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HK economy rebounds in 3rd quarter, up 4 percent (11/28/03)

Hong Kong's GDP bounced back with a solid growth of 4 percent in the third quarter over a year earlier, in contrast to a 0.5 percent decline in the second quarter, Hong Kong's Financial Secretary Henry Tang said here Friday.

    These figures suggest this full-year forecast for 3 percent GDPgrowth is on target, Tang said at a news briefing before the government released the third quarter economic report.

    He noted that in seasonally adjusted terms, the turnaround was even more pronounced, with a 6.4 percent leap in real terms in thethird quarter, compared with a 3.7 percent dip in the second quarter.

    The economic figures pave the way for "cautious optimism." Growth in tourism, offshore trade and export services drove the rebound, as did the first increase in personal consumption seen intwo years, said Tang.

    Deflation remains a challenge, he said, adding that he is confident Hong Kong will come out of the deflationary period in 12to 18 months. The picture improved slightly, as the deflation ratewas -3 percent this quarter, versus -4 percent last quarter.

    The rebound was most evident in the tourism-related sectors, driven by a sharp resurgence in visitor arrivals from the mainlandof China, especially after the launch of the individual visit scheme for mainland visitors to Hong Kong in late July.

    Coupled with buoyant offshore trade, services exports rose 6.9 percent in real terms in the third quarter over a year earlier, representing a sharp turnaround from the 13.9 percent plunge in the second quarter.

    As labor market conditions improve and confidence returns, consumers are spending again, showing the first increase in two years. Spending on private consumption rebounded to a 2 percent rise in real terms in the third quarter over a year earlier, having fallen 2.6 percent in the second quarter.

    Investment spending declined marginally, by 0.4 percent in the third quarter over a year earlier, much smaller than the 5.7 percent dip seen in the second quarter.

    A pick-up in machinery and equipment purchases -- conceivably upon improved business outlook -- played a role in this. However, building and construction output remained slack, due to the winding down of several large infrastructural projects and a lull in private sector building projects.

    Total export of goods rose 9.8 percent in real terms in the third quarter over a year earlier. This was not as marked as the 14.3 percent surge in the second quarter, due in part to a shift to a higher base of comparison. Exports to both East Asia and the European Union sustained robust growth, more than offsetting the decline in exports to the United States.

    Prompted by the recovery in economic activity, the seasonally adjusted unemployment rate fell from 8.6 percent in the second quarter to 8.3 percent in the third quarter -- and slid to 8 percent in the three months ending October.

    Over the same period, the underemployment rate came down even more, from 4.3 percent to 3.6 percent, and to 3.5 percent in the three months ending October.

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