A man looks at clothing at an H&M store in the Causeway Bay district of Hong Kong on July 25, 2023. (PHOTO / AFP)

Hong Kong’s retail sector continued its upward momentum in December, with a year-on-year increase of 7.8 percent, but industry insiders are cautious in their expectations of the future performance of the sector amid a growing wave of local residents spending outside the city and changes in spending patterns among tourists.

The provisional estimate of the value of total retail sales in December was HK$36.3 billion ($4.64 billion), the Census and Statistics Department said. 

On a yearly basis, the sales value of jewelry, watches and clocks, and valuable gifts surged by 50.1 percent in December, followed by medicines and cosmetics, which rose by 32.7 percent

For the full year of 2023, total retail sales stood at HK$406.7 billion, an increase of 16.2 percent from a year earlier. But for the last three months of 2023, the provisional estimate of the value of retail sales had decreased by 3.3 percent compared with the third quarter.

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“Visitor arrivals should increase further alongside the continued recovery of handling capacity. Rising household income also bodes well for local consumption,” a government spokesperson said on Thursday.

Online sales accounted for 7.8 percent of total retail sales in December with a provisionally estimated value of HK$2.8 billion, representing a year-on-year decrease of 29.7 percent. For 2023 as a whole, preliminary estimates point to a decline of 5.9 percent in online retail sales compared with 2022.

On a yearly basis, the sales value of jewelry, watches and clocks, and valuable gifts surged by 50.1 percent in December, followed by medicines and cosmetics, which rose by 32.7 percent.

The most notable decline in sales value was in electrical goods and other consumer durable goods, which fell by 27.9 percent in December. This was followed by fuels and commodities in supermarkets, which saw contractions of 12 percent and 6.3 percent, respectively.

“Looking ahead, the government’s efforts to promote mega events and launch various activities, including ‘Day x Night Vibes at 18 Districts’, should provide support to retail businesses,” the spokesperson said.

Hong Kong has been making great strides in promoting the development of a “mega event economy” to attract more visitors to the city. 

Based on a survey covering more than 4,000 retailers, the HKRMA believes that for January 2024, retail sales in local consumption categories

During the upcoming Lunar New Year holiday, for instance, the city will host the “Cathay International Chinese New Year Night Parade” on the first day of the Lunar New Year and a 23-minute fireworks display on the second day. 

Such events can create a joyful atmosphere in the city, but their impact on the retail sector is being closely monitored, as the spending patterns and purchasing power of inbound tourists have changed following the pandemic, and many Hong Kong residents may opt to travel outside the city during the holiday, which could also weigh heavily on local consumption, said Bond Law, executive director of the Hong Kong Retail Management Association.

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Based on a survey covering more than 4,000 retailers, the HKRMA believes that for January 2024, retail sales in local consumption categories, such as supermarket commodities and fuels, will remain on par or decline compared with December. 

This can primarily be attributed to weaker consumer confidence as a result of the sluggish stock market, as well as the phenomenon of locals traveling to the mainland for shopping, said Annie Tse Yau On-yee, chairwoman of the HKRMA.    

“The performance of the retail industry remains below the levels seen in the pre-pandemic year of 2018, and there’s still a long road to recovery,” Law added.

Contact the writer at irisli@chinadailyhk.com