Hong Kong March retail sales grow for first time in 2 years as tourism picks up

Hong Kong's retail sales in March rose for the first time in two years on improved domestic consumption and as visitors from the Chinese mainland returned to shop in the city.

Retail sales rose 3.1 percent in value terms to HK$35.7 billion ($4.6 billion) after a revised 5.8 percent drop in February, government data showed on Friday. The last time retail sales grew was in February 2015.

In volume terms, March sales climbed 2.7 percent year-on-year, compared with a revised 6.2 percent decline in February.

The Hong Kong government said retail sales resumed moderate year-on-year growth in March, reflecting a recovery in visitor arrivals and robust local consumption that was underpinned by "favourable job and income conditions".

"Looking ahead, the near-term outlook for retail sales will continue to depend on the recovery pace of inbound tourism as well as how various external uncertainties would unfold and shape local economic sentiment down the road," the government said in a statement.

A weaker Hong Kong dollar and a halt in Chinese tours to nearby South Korea - in protest against South Korea's decision to deploy a U.S.-developed missile defence system to counter the threat of North Korea's nuclear weapons programme - have benefitted the city, retailers say.

"The Korea issue won't be solved immediately, and it will benefit Hong Kong in the short run," said Thomson Cheng, chairman of Hong Kong Retail Management Association.

Hong Kong's tourist arrivals in March rose 8.8 percent from a year earlier to 4.59 million, the government said. That compared with a 2.7 percent decline in February.

Of those, the number of mainland visitors climbed 10.4 percent to 3.33 million, accounting for 72.6 percent of the total. That compared with a 6.8 percent drop in February.

For the first quarter of 2017, the retail sales value fell 1.3 percent against the same period a year earlier, while it was down 1.7 percent in volume terms.

The city's retail sales have sagged in the past two years due to a decreasing number of tourists. Once the favourite shopping destination for mainland Chinese, those tourists are now heading to other cities, such as Japan, which offer cheaper travel options.

The Hong Kong dollar is pegged to the U.S. currency, which means it is prone to strengthen when other Asian currencies weaken. The local dollar weakened to its lowest in 14-months at 7.7848 to the U.S. dollar on April 25.

Sales of jewellery, watches, clocks and valuable gifts in Hong Kong increased 8.4 percent in value terms in March, against a 2.5 percent rise in February.

In April, Chow Tai Fook Jewellery saw its Hong Kong and Macau same store sales value up 4 percent for January-March quarter, while smaller rival Luk Fook also posted 2 percent growth in same store sales during the period.

Earlier this week, cosmetic chain Sa Sa International saw retail sales in the city and Macau up 4 percent for the 3-day Labour Day holiday ending on May 1.

($1 = 7.7828 Hong Kong dollars)