Retail sales expected to rise 5pc

Hong Kong's retail sales are expected to rise 5 percent to HK$428 billion this year, PricewaterhouseCoopers said yesterday.

Compared with the 16 percent growth in 2023, this cautious forecast considered the global economic headwinds, geopolitical situation and uncertainty of the Hong Kong stock and property markets, the accounting and consulting firm said.

With global interest rates eased from the second quarter, retail sales will grow faster to 8.4 percent during the second half of the year compared to a growth of 2.4 percent in the first half, according to Michael Cheng Woon-yin, the firm's consumer markets leader.

If the US starts to reduce interest rates, the appreciation of the yuan would reduce the price difference between Hong Kong and the mainland and the trend of Hongkongers heading north to consume in the mainland will ease, thus benefiting Hong Kong's retail sales, Cheng said.

Cheng also suggested that the recovery of the tourism industry needs more substantial and sustained measures to boost consumption through the organization of more regional and world-class events.

The resumption of multiple entry permits for mainland visitors will also boost tourism and stimulate Hong Kong's retail sales growth, the firm added.

Department stores, medicines and cosmetics and luxury items will continue to be the main contributors to retail sales growth, with growth rates projected at 19.4 percent, 13.9 percent and 11.4 percent, respectively. Retail sales of the three sub-categories will increase with the imminent launch of the Kai Tak Sports Park and The Twins in Kai Tak, which should help transform the district into a large-scale lifestyle retail and leisure location with increased traffic and spending, PwC said.

With Louis Vuitton and Dior choosing Hong Kong to host fashion shows in 2023 and 2024, it remains an important market for luxury retailers.

Cindy Ngan, a partner in the climate and sustainability practice of PwC Hong Kong, said as the government launches its waste-charging scheme in August 2024, new retail opportunities are likely to arise as many companies are exploring alternative packaging materials, developing new business models and focusing on product innovation prioritizing recyclability.

She said ESG measures to enable product innovation for sustainable use currently cost more, but there is an opportunity to lead industry reform in the long run.

The company concluded that the city's retail landscape is undergoing structural changes and it could take another three to five years to fully recover to its peak levels in 2018.