What: Hong Kong government does not forecast an improvement of the retail situation in the coming months.

Why it is important: Retail is shifting in terms of regional balance in South East Asia.

The Hong Kong government has issued a caution regarding the near-term challenges facing the territory's retail sector, despite some emerging signs of stabilization. According to the latest data from the Census and Statistics Department, retail sales in June dropped by 9.7% year-on-year, following a revised 11.4% decline in May. The first half of the year saw an overall decrease of 6.6% in retail sales.

A government spokesman attributed the decline to shifts in consumption patterns among visitors and residents and the impact of a strong Hong Kong dollar. However, there was a noted month-on-month seasonally adjusted increase of 2.3% in June, suggesting early signs of recovery in retail activities.

Looking forward, the government remains optimistic, citing the central government's supportive measures and the SAR government’s efforts to boost the retail sector through events and local support initiatives. These include promoting a mega event economy and supporting small- and medium-sized enterprises. Additionally, the Hong Kong Trade Development Council is launching the inaugural Hong Kong Shopping Festival on Mainland e-commerce platforms to enhance the visibility of Hong Kong brands and assist local enterprises in expanding their e-commerce presence.

Despite the overall downturn, online domestic transactions in June saw a rise, accounting for 7.8% of total retail sales, up 5.2% from the previous year. However, significant declines were noted in specific sectors: jewellery and watches fell by 23.1%, apparel by 13.2%, and department store sales by 18.6%. Conversely, the medicines and cosmetics sector experienced a growth of 3.4%.

Government warns Hong Kong retailers ‘challenges’ will endure