Hong Kong GDP growth is expected to slow down this year as the effects of a slump in tourism and exports are felt. Such slow down casts a shadow over the economic outlook for Hong Kong, reminiscent of the period leading to the shrinking of GDP at the start of both 1998 and 2008 crises. While the worsening retail sales might seem similar to the 1998 and 2008 crises, it could be a signal that the market is readjusting toward one geared by local consumers once again.
Stages of Economy Cycling
In general, we have identified 4 economic development stages.
Our latest Consumer Confidence Index showed that consumers demonstrated increased concern in both recession sentiment and job prospects, which implies that Hong Kong is moving into stage 1. However, while there are some similarities of our present day situation as compared to the past, the rocky path at the moment is unlikely to go further downhill. Hints can be seen as real estate prices have yet to see a big drop, the mainland tourist dynamic is undergoing structural changes, new communication channels are emerging, etc. Also, based on our MarketTrack figures, some local demand categories growth (such as household products) is still sustaining for manufacturers.
The Million-dollar Question: Where Do We Go Next?
Consumers respond differently under each business cycle, but there are always different approaches to capture business opportunities. Through Nielsen Retail Barometer, we understand that retailers are proactively looking for product enhancement, store segmentation or digitalization as a way to stimulate local consumption demand. For mainland tourists, good news is that they are still planning to visit Hong Kong with spending power. Reinventing ways to draw these segments attention, extending product reach through digital and measure your instore performances so as to response quickly to the market is getting more important.
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