Rising wages fuel gains in Hong Kong retailing

HONG Kong's retail sales climbed a more-than-expected 14.3 percent in June from a year earlier as stock-market gains, rising wages and a low jobless rate encouraged spending.

The increase in sales by value was the biggest in four months, outpacing May's 10.2-percent gain and the 10-percent median estimate of 11 economists surveyed by Bloomberg News. The government released the numbers on its Website yesterday.

The benchmark Hang Seng Index of stocks has climbed 16 percent this year and the jobless rate has fallen to 4.2 percent, the lowest since 1998, as Hong Kong benefits from the growth on the Chinese mainland.

The mainland economy expanded 11.9 percent in the second quarter, the fastest pace in more than 12 years, on exports and investment.

"The fundamental situation is so good," said Paul Tang, chief economist of Bank of East Asia Ltd in Hong Kong. "Unemployment's dropped even further and the stock market is boosting wealth."

Hong Kong shoppers are boosting Switzerland's watch exports. Shipments to the city rose 27 percent in June from a year earlier to 208.6 million francs (US$173 million), according to the Federation of the Swiss Watch Industry. That was close to the 212.7 million francs of exports to the United States.

Retail spending growth surged in May from a three-month low of 3.2 percent in April because of a 16-percent gain in the number of tourists from the mainland. In June, arrivals from the mainland rose 6.3 percent. More than half of Hong Kong's visitors come from the mainland.

A buoyant labor market will continue to underpin "solid" retail sales, Enoch Fung, an economist at Goldman Sachs Group Inc in Hong Kong, said in a note last week. Wage growth will accelerate, pushing inflation higher, Fung said.

The city's pay rates, including overtime and bonuses, increased 2.4 percent from a year earlier in the first quarter, according to a government survey.

Consumer prices rose 1.3 percent last month after the cost of pork increased. A government waiver of property rates is keeping a lid on inflation this quarter.

By volume, retail sales increased 12.8 percent after rising 9.4 percent in May.