Omicron restrictions throttled Hong Kong retail sales in March

Hong Kong’s retail sales fell in March for a second consecutive month after the city imposed stringent restrictions to curb an outbreak of COVID-19 but the government expected the sector to draw support as cases decline and measures are eased.

Retail sales in March fell 13.8% from a year earlier to HK$23.8 billion ($3.03 billion), official data released on Thursday showed. That followed a 14.6% drop in February.

“The improved local epidemic situation of late and thus the progressive relaxation of social distancing measures, along with the disbursement of the first batch of electronic consumption vouchers in early April, will render support to the retail sector,” a government spokesman said.

In volume terms, retail sales in March dropped 16.8% from a year earlier, compared with a 17.6% decline in February.

At the start of this year, Hong Kong implemented its most draconian anti-COVID-19 measures as the Omicron variant brought a dramatic spike in infections, with businesses hit hard by widespread closures.

The city’s economy contracted 4% in the first quarter of this year, breaking four quarters of growth, but the government expects an improving situation with the local epidemic and support measures to help lift domestic demand for the remainder of the year.

Hong Kong’s economy is expected to grow 2.0% to 3.5% this year after expanding 6.4% in 2021.

Sales of jewellery, watches, clocks and valuable gifts, which before the pandemic relied heavily on tourists from the mainland, plunged 36.8% in March following a 33.6% drop in February, the data showed.

Clothing, footwear and related products dropped 41.5% in March against a 39.0% drop in February.

Tourist arrivals in March plunged 73% from a year earlier to 1,800. That compares with a drop of more than 52% in February.

Online retail sales were a bright spot, surging 30.9% year-on-year in March in value terms after February’s 50.0% growth.

Hong Kong will further ease COVID restrictions as cases in the financial hub continue to ease. Beaches and swimming pools reopened on Thursday and restaurants were allowed to serve eight people per table, up from four.