Higher tourist arrivals failed to boost retail sales in Hong Kong during May, as consumer sentiment remained cautious against the background of continued global economic uncertainties and the ongoing citizen protests in the city against a proposed extradition bill. Figures released by the Census and Statistics Department of the HK government revealed a 1.3% drop in retail sales by value and a 1.7% decline in value terms during the month, marking the fourth consecutive monthly decline this year.

Sales of jewellery, watches, clocks and other valuable gifts dropped 2.7% year on year, and other categories such as apparel, motor vehicles, electrical goods, etc. also registered declines.

Total retail sales across all categories are now down 1.8% in value terms over the first five months of the year with a 2.2% dip in volume terms, figures released by the Hong Kong Retail Management Association (HKRMA) indicated.

A government spokesperson clarified that the rise in tourist traffic (up nearly 20%) was mainly due to shift in the dates of the May Golden Week holidays in the Mainland this year, with a lower number of days falling in the month of April.

The outlook for retail sales will continue to be clouded in the near term, the spokesperson added, with a “still-cautious consumption sentiment amid an uncertain global economic environment”.

Observers said that the social movement over the extradition bill, which has sparked sporadic clashes that have disrupted commerce in the city, as well as the US-China trade war, would continue to cloud sentiment in the coming weeks.

Further, an official of the Tourism Board told the media that the full impact of the disturbances on tourism would only be seen in July as many of those travelling in late June had already finalised plans before the demonstrations spilled over on to the streets and led to the cancellation of the popular three-day dragon boat carnival during the month.

Analysts at PwC said that outlook for June remained poor, with business expected to be quieter, and that given last year’s high base, there could be a double-digit decline in overall sales.

In a statement issued in late June, the consultancy said that it expected HK retail sales to shrink 5% over 2019 “to approximately HKD 460 billion in 2019, as the ongoing Sino-US trade dispute, equity market turbulence and volatility of Renminbi continue to cast a long shadow on consumers sentiment and actual spending”.

Michael Cheng, Asia Pacific and Hong Kong/China Consumer Markets Leader for PwC, said, “Local retail sales and mainland tourist arrivals are expected to continue on a downward trend through the rest of 2019, indicating a slowing consumer market in Hong Kong.”