Hong Kong retail slumps as Chinese consumers vanish

Bloomberg

Hong Kong’s retailers will need to get creative to survive the deepening recession that’s enveloped the city as tourists from the mainland who fuelled past rebounds are unlikely to come to the rescue this time.
The city’s retail sales by value in March sank 42% from a year earlier to HK$23 billion ($2.97 billion), according to a government release. That was a slight uptick from February’s record decline. By volume, sales dropped 43.8% from a year earlier.
Two straight months of retail sales declines greater than 40% is unprecedented. The city’s wider economy contracted 8.9% in the first quarter from year-ago levels, suffering its worst quarter on record and extending the first recession in a decade. Private consumption sank 10.2% in the period while exports of services plummeted 37.8%, according to a the government release.
“People aren’t buying because they are worried about their future,” Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA said before the data was released. “Why would you spend in such circumstances?”
For the first quarter, sales by volume fell 36.9% from year-ago levels, the biggest drop for a single quarter on record, the government said.
Restaurants, shopping malls and luxury shops took the biggest hits, with the value of sales of food falling more than 21%. Department stores sales dropped almost 43%, and jewellery, watches, clocks and valuable gifts plummeted 75% in the month.
“The business environment for retail trade will remain very difficult in the near term amid the deep economic recession and sharp deterioration in the labour market,” according to the government release.
“The Covid-19 pandemic and resulting nti-epidemic measures brought inbound tourism to a standstill and seriously disrupted consumption-related activities.”
While economies around the world are struggling with lockdowns from the coronavirus pandemic, the outlook for Hong Kong’s consumption industries is particularly bleak with the acute downturn due to the virus coming on the heels of a recession from months of anti-government protests.
That tension — which kept mainland tourists away — means that even as restrictions to contain the virus are lifted, it’s unlikely to spur a return to previous levels of cross-border traffic and spending.
“China tourists will probably be half of what they used to be,” Michael Tien, a member of the Hong Kong Legislative Council and founder of fashion retailer G2000 Apparel Ltd, told Bloomberg Television.
With Hong Kong also stepping up border control measures due to the virus, visitor arrivals from China plummeted about 99% from a year ago in March to just over 30,000 people, according to figures from the Hong Kong Tourism Board.
“We are in a very difficult time,” Hong Kong Chief Executive Carrie Lam said at a regular briefing.
Lam also announced the city will soon relax some social distancing measures. “When compared with the financial crisis, the Sars crisis, the financial tsunami, it’s worse than those occasions.”