Hong Kong Q3 growth surprises, but trend may not sustain

Hong Kong's economic growth in the third quarter was faster than expected on strong domestic spending and exports although the government warned the pick-up was unlikely to sustain in the final quarter due to the effects of the pro-democracy protests.
Business activity in the former British colony has been hit by street protests since late September, choking off the city's shopping and financial districts and affecting tourism. But recent global demand for tech goods has helped exports. The economy expanded a seasonally adjusted 1.7 percent in the third quarter, the government said on Friday after contracting unexpectedly in the second quarter.
Annual growth was 2.7 percent, compared with a 1.8 percent expansion in the previous three months as private consumption grew at its fastest pace since the first quarter of 2013, benefiting from the launch of Apple's iPhone 6. "Looking ahead, the rather encouraging developments in the third quarter may not be able to extend into the fourth quarter, in light of disruptions to economic activities due to the "Occupy Movement" since late September," the government said in a statement.
The impact of pro-democracy protests on the city may only be seen in the fourth quarter, but economists say there is anecdotal evidence it has dragged on economic activity. "The lack of hard data makes it difficult to assess the impact of the demonstrations, but with surveys suggesting sales in some sectors such as jewellery and fashion items were down by as much as 50 percent year-on-year in early October, GDP growth is likely to drop back sharply in the current quarter," said Gareth Leather, an economist at Capital Economics in London.
The median projection of five economists for third-quarter growth was for an expansion of 1.8 percent. Three economists with quarterly forecasts estimated GDP would expand 0.4 percent from the June quarter, when it contracted by 0.1 percent. Underpinning third quarter growth were exports, which rose by their fastest pace since the fourth quarter of 2013. The services sector also gained from a pick-up in visitors while consumption strengthened after two quarters of stagnation. The government revised its 2014 GDP estimate to 2.2 percent after cutting it to 2 to 3 percent from 3 to 4 percent at the start of the year. The economy expanded 2.9 percent in 2013.