Hong Kong Q3 GDP seen up 5.8 percent on robust consumption

Hong Kong Q3 GDP seen up 5.8 percent on robust consumption

	Published : Fri, 16 Nov 2007 03:07 By : Agencies Print this Story

HONG KONG (Thomson Financial) - The Hong Kong economy is expected to have grown by 5.8 percent in the third quarter from the same period last year on robust consumption fueled by improving employment conditions and a buoyant stock market, economists said.

'Private consumption will be the main driver of GDP,' said Sean Yokota, economist at UBS.

But the expected growth was much slower than the 6.9 percent pace in the second quarter as weaker US demand hurt Hong Kong's exports.

Yokata forecasts GDP to have risen 6.4 percent in the third quarter, citing a steady rise in

household income due to better employment conditions and a robust stock market, which

supported domestic spending.

The jobless rate was at a nine-year low in the third quarter and the number of employed persons stayed at a record 3.5 million.

The Hong Kong market scaled record highs in the quarter after China said it will relax certain investment rules, among them allowing its citizens to invest in Hong Kong stocks.

The Hang Seng Index added more than 5,000 points during the third quarter before reaching an all-time high of 31,958.41 points on Oct 30.

But investments eased as imports of machinery and equipment slowed, Yokota said.

Exports rose around 8 percent in the third quarter after rising more than 11 percent in the second, as exports to the US weakened. This weighed on the overall trade balance despite brisk exports to China and other Asian markets.

'Third-quarter export growth was capped by weak exports to the US, but overall trade was strong,' said Daniel Chan, senior strategist for DBS Bank.

Chan is looking at GDP growth of 6.6 percent for the quarter.

Going forward, UBS expects the Hong Kong economy to slow further as exports decelerate.

'Consumption should support growth as the labor market remains healthy, but net exports will continue to be a drag on growth,' UBS's Yokota said.

The government will release third-quarter GDP data after the stock market closes Friday.

leonora.walet@thomson.com

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-- by Leonora Walet --

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