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| Economic Insights 經 濟 透 視 |Early Indicators Not Good早 期 指 標 不 樂 觀The threat of a sharp global slowdown eased with improved activity in the United States and better policies in theeuro area, but the improvements are very fragile, writes David O'Rear隨 著 美 國 經 濟 活 動 好 轉 及 歐 元 地 區 推 出 更 適 切 的 政 策 , 全 球 急 劇 放 緩 的 威 脅 已 經 緩 和 , 但 有 關 改 善 非 常 薄 弱歐 大 衛Hong Kong’s economy grew at its slowest pace sincemid-2009 in the first quarter, rising barely 0.4% overJanuary-March 2011. (The first graph illustrates theoverall trend.) While the domestic side – private consumption(up 5.6%) and capital investment (a strong 12.2%) fared well,as always, our trading partners’ woes defined the end result.International merchandise trade is equal to nearly 3½ timesour total GDP, and trade in services adds another 66.5%. Naturally,the net of exports minus imports is what really counts,but we need the two-way flow to earn a living, and it is failingus this year.Merchandise trade fell 4.1% in real (two-way) terms in Q-1,and while the services flow rose 3.2%, that was a let down fromprevious quarters. To clarify a bit more, the domestic side ofthe economy grew by HK$18,191 million in real terms, butthat was more than offset by a $35 billion (-3.8%) drop ingoods and services exports.The slowing economy, and the pause in the rise of the renminbiin the past year, has helped slow our inflation rate, asthe second chart shows. On a consumer basket basis, we’recoming down from an uncomfortable over 6% to nearly 5%in recent data. Economy wide, the much broader GDP deflatorhas slowed more sharply, from 5% to under 3%. The differenceis primarily in international trade prices, and so hasa much smaller effect on households than something such asreal estate prices and rents.More worrying is the deterioration in the pace of job creation.The third graph highlights the direction of the unemploymentrate (softening) and the year-on-year percent change inthe total number of jobs (slowing sharply). The coming yearwill be an interesting one for labour, as those advocating higherminimum wages, standardised working hours and collectivebargaining run into the sobering effects of a slowing economy.Unemployment has remained at 3.5% or less for over a year,and shows no signs of rising quickly. The number of full-timeemployees increased 3.5% over the past year, a strong but slowingtrend.sectors. The outlook is not good, particularly in Europe, andthe impact on trade is being felt around the region.In the first quarter, combined imports and exports fromIndonesia and Thailand rose less than 2%, as compared to9.9% in Q-4 2011. For Japan, Korea and Taiwan, combinedtwo-way trade was up 6.2%, barely one-third of the 17.9%pace of the previous three months.Asia’s economic growth rates are slowing across the board.Korea eked out 2.8% real growth in the first three months ofthe year, down from 3.4% in Q-4. Taiwan came in at less than0.4%, down from 1.9% in the last quarter of 2011.Still, there are some positive signs, for those who insist thatthis time the recovery is for real. In the U.S., real private spendingon consumer goods rose 1.7% in the first three months ofthe year, with durable goods leading strongly (+7.6%), andnondurables lagging, at just 0.6%. Many of those products aremade in Asia, and so have some direct bearing on our owneconomy.Germany’s preliminary rate in the first quarter was 2.2%(qq), well above expectations and nearly 2% higher than ayear ago. But, much of that growth is based on exports and alarger share of the increase in sales abroad has been to Asia. AsAsia slows, so will that portion of the German economy.ElsewhereThe global economy will define our overall growth, withvery different influences on the domestic, trade and tourism22 June 2012 The Bulletin 工 商 月 刊