Hong Kong January retail sales fall for 11th straight month

Hong Kong retail sales, which suffered their worst decline in 13 years last year, saw weak sentiment extending into January on slumping tourist arrivals, weak local consumption and a strong local currency.

Retail sales in January slid 6.5 percent from a year earlier to HK$43.6 billion ($5.61 billion) in value terms, compared with an 8.5 percent decline in December. In volume terms, January sales decreased 5.2 percent.

"The near-term outlook for retail sales will remain constrained by the sluggishness in inbound tourism," the government said in a statement. "External uncertainties, including a dimmer global economic outlook and U.S. interest rate normalisation, may add further headwinds."

The value of retail sales fell for a second year in 2015 - down 3.7 percent - the biggest decline since 2002 when they dropped 4.1 percent.

Hong Kong is confronting mounting economic challenges as the prospect of U.S. interest rate rises drives fears of capital outflows that could put pressure on the financial hub at a time when China's economy is growing at its slowest pace in 25 years.

Tensions that have rocked the city, including protests over the Lunar New Year that was sparked off by street vendors, have added to the strains on the retail and tourism industries already suffering from a drop in mainland tourists.

EXPENSIVE DESTINATION

The strong Hong Kong dollar, which is pegged to the U.S. dollar, has made the city an expensive destination and China's cash-rich tourists are heading for more exotic destinations.

Hong Kong tourist arrivals, which fell 2.5 percent in 2015 in the first decline since 2003, dropped 6.8 percent from a year ago to 5.23 million in January. Mainland visitors, which accounted for 77 percent of the total, slumped 10 percent to 4.04 million.

Hong Kong's comparatively high rents also hurt retailers as fewer mainland tourists come to shop, forcing operators to close and scale back expansion.

January sales of jewellery, watches, clocks and valuable gifts in value terms fell 16.3 percent, a 17th consecutive month of decline.

Department store sales slid 3.6 percent on year, against a 12.3 percent drop the previous month. Wearing apparel fell 4.9 percent while medicines and cosmetics decreased 3.6 percent.

Hong Kong's top jeweler Chow Tai Fook Jewellery Group and cosmetics chain operator Sa Sa International Holdings saw sales declines at least 20 percent during the key Lunar New Year shopping season in February.

Department store operator Lifestyle International also saw a double-digit decline in sales during the holiday.

Last week, Hong Kong rolled out a multi-billion dollar package of sweeteners to bolster its economy as a slowdown in China and rising political tensions deepen its economic woes.

$1 = 7.7755 Hong Kong dollars