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EiGhT 5 & tWo
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Q1 GDP up 8.2%



The economy sustained its strong upturn in the first quarter of this year, with GDP rising 8.2% in real terms, following 7.5% growth in the previous quarter, Government Economist Kwok Kwok-chuen says.



On a seasonally adjusted quarter-to-quarter comparison, GDP expanded for the eleventh straight quarter, by 2.4% in real terms in Q1.



Mr Kwok said today that given the exceptionally strong GDP growth in Q1, Hong Kong's economy should have little difficulty in attaining the forecast GDP growth of 4-5% as released in the Budget.


External environment

Although the global economy continued to show a strong performance in Q1, the economist said the external environment is still clouded by downside risks like recent hikes in oil prices, rising US interest rates, avian flu, global trade imbalances and tightening measures on the Mainland.



"Some of these risks have intensified recently. How these various risk factors will play out is critical to Hong Kong's trade and economic performance in the coming quarters," Mr Kwok said.



"As the prospects for the global economy are still largely positive, there could be some upsides from the external side. However, in view of the wide range of uncertainties still prevailing in the external environment as well as the recent volatilities in the international financial markets, it is more prudent to maintain the forecast GDP growth for 2006 unchanged at 4% to 5% in the present round."



The economy in Q1 expanded on a broad front, driven by robust external trade, distinct pick-up in consumer spending, and a continued surge in investment in machinery and equipment.



Merchandise exports

Merchandise exports grew 14.4% in real terms over a year earlier, thanks to surging intra-regional trade, with the Mainland as the key growth driver. Exports to the EU and the US also fared well. Exports of services rose 8.9% in real terms in Q1, with both offshore trade and inbound tourism growing further.



On the domestic front, spending on private consumption grew 4.5% in Q1, supported by improving employment incomes, a stronger household balance sheet along with higher share prices and a reviving property market. Consumer sentiments remained upbeat, even though interest rates rose further during the quarter.



Overall investment spending rose 8.5% in real terms. Expenditure on machinery and equipment remained the key growth driver, with 23.3% growth, supported by higher corporate profits, briskly expanding business volume and a sanguine economic outlook. Yet building and construction activity was still the laggard.



Labour market conditions continue to improve, with the seasonally adjusted unemployment rate falling to 5.2% in Q1 and further to 5.1% in February-April.



Since 2003, some 240,000 additional jobs have been created. The number of long-term unemployed has also come down, indicating that many of those who had difficulties in finding jobs in the past are now being absorbed back into the labour market gradually.



Inflation benign
Consumer price inflation remained benign, running at 1.6% year-on-year in the first quarter. The successive rises in private housing rentals over the past two years have begun to creep into consumer prices to a greater extent. Yet inflationary pressure has been mitigated by the easing in import prices of food and consumer goods.



Despite rising rentals and wages, the cost pressure from these two cost elements was not that significant when viewed against the concurrent surge in business turnover and also the rapid labour productivity growth stemming from the hefty investment in machinery and equipment.



On the near-term economic prospects, locally, consumption looks set to hold up rather well, along with better job prospects and rising employment incomes.



Construction weak

Investment in plants and equipment seems likely to increase further in tandem with the much improved corporate profits and also to cater for the growth in business. But construction is likely to remain weak in the near term, thereby capping the upside of overall investment.



Meanwhile, consumer price inflation, though creeping up, is likely to be still at a moderate and healthy level for 2006 as a whole.



To take on board the release of the new 2004-05-based Composite CPI series, which is on average about 0.4 of a percentage point lower than the old 1999-2000 series, the forecast rate of increase in the Composite CPI for 2006 as a whole has been revised from 2.3% to 2%.



For the forecast rate of change in the GDP deflator, it is unchanged at 0.5%.
 

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...::HK.:.:.:.LA::...
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Good Job HK... let's hope we'll still see news like this in 20/30/50 years :-(
 
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Let's hope the bennefits of this growth is being felt by the bottom end of society, low-income families should be better off, with wage increases etc

transportation costs hopefully will be cheaper too with MTR/KCR merger

and, more re-investment into the local HK economy & infrastructures, rather than moving it north into the mainland, some businesses & shopping are best done inside HK internally

Support the local HK economy !
 

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CFCheng said:
This is good news, and when the government has solved the pollution problem, everyone is happy.

it's all dependent on 廣東's tactic. whether economy first, or environment first. of course, hk government urge for lower emmision every year, however, the result is still not obvious.
 

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8.2 % should be much higher than many ppl's expectation. as explained by "trueapprentice", we have seen the strong economic growth, but for most of the majority, is there a caculator that can show us the benefit as much as 8.2% ?
 

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EiGhT 5 & tWo
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Discussion Starter · #10 ·
waikhplkcc said:
it's all dependent on 廣東's tactic. whether economy first, or environment first. of course, hk government urge for lower emmision every year, however, the result is still not obvious.
I think there is dire need for the HK Government to collaborate with the Guangdong Authority so as to reduce the emission of polluted air, it would be a win-win game for both sides, but I don't think it's a piece of cake coming up with consensus.
 

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Discussion Starter · #11 ·
trueapprentice said:
Let's hope the bennefits of this growth is being felt by the bottom end of society, low-income families should be better off, with wage increases etc

transportation costs hopefully will be cheaper too with MTR/KCR merger

Support the local HK economy !
Trueapprentice, you gave an excellent opinion here, I hope the benefits resulted from this growth is being felt by the grass roots, I think they are better off than before, but not as obvious as the rapid economic growth.

As for transportation costs, the reduction is expected due to the MTR/KCR merger.
 
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