2016年CRI Decline Narrowed, but Pessimism Remains about Retail in HK

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Hong Kong's retail¹ sector² has shown signs of recovery for the second month, as the decline eased to 7.5 per cent in April from 9.8 percent a month earlier.

But this is the 14th month in a row that retail sales have declined, the longest contraction³ period since the Asian Financial Crisis in the late 1990s.

The chairman of the Hong Kong Retail Management Association, Thomson Cheng, believes the downward trend will continue for the rest of the year.

"Price reduction and promotional campaigns will last till the end of June or early July, so I think the decline of retail sales should slow down a bit. But does it mean it is going to rebound⁴ any time soon? I don't think so. It will continue to fall. Retailers⁵ will have a hard time throughout this year."

Sluggish⁶ retail sales have already had an effect on sky high rents in Hong Kong, with prices slashed⁷ by half in some traditional shopping areas. Many stores no longer renew their leases when they end, and "to let" signs have been a common sight on the streets for many months. As a result, daily rental⁸ or pop-up stores have become popular.

Daniel Wong is executive director of Midland Realty.

"It is more flexible for the tenants⁹, who would like to try the market first. They sell all kinds of goods, electronics, phone products, snacks and so on. It is also good for the landlords because they don't have to leave the shop idle. "

Retail sector legislator Vincent Fang¹⁰ says the government should do more to support retailers in such an adverse¹¹ environment.

"The government should set up some schemes to attract local residents to consume more, or attract more visitors, that would stabilize¹² the retail sector. We cannot overly rely on mainland tourists, and we should develop tourism in a more balanced way. "

At the same time, the Index of Consumer Sentiment in Hong Kong has sunk to the lowest level in more than three years to 88, showing that local residents remain pessimistic about the economic outlook.

Angel Young is the Managing Director for Nielsen Hong Kong and Macau.

"People in Hong Kong are less confident about the outlook in the wake of a slower global economy. We have also seen the retail sector dragged down by fewer mainland tourists. So I am being prudent¹³ with the index in the next six months."

The first four months of this year have seen a 12 percent fall in mainland tourists to Hong Kong, with a smaller decline in April. The Hong Kong government says it's keeping a close eye on the numbers to monitor the trend.