By Chester Yung
HONG KONG--Hong Kong's economy shrank for the first time in three years in the second quarter as private consumption weakened, prompting the government to cut its full-year growth forecast.
Gross domestic product for the three months ended June 30 contracted 0.1% from the first quarter on a seasonally adjusted basis, reversing a 0.3% growth in the first quarter, the city's government said Friday. The mild contraction is in line with the median forecast of five economists polled earlier by The Wall Street Journal and marks the first contraction since a 0.4% decline in the second quarter of 2011.
Second-quarter GDP expanded 1.8% from a year earlier, slower than the first quarter's 2.6% growth andlower than the median forecast of a 2.0% expansion in The Wall Street Journal's poll.
Hong Kong's weaker second-quarter GDP data prompted the government to cut its 2014 growth forecast to a range of 2% to 3% from 3% to 4%. The city's economy grew 2.9% in 2013.
Private consumption, which accounts for two-thirds of the city's GDP, lost steam in the second quarter and become the main drag of the economy, contracting 0.9% from the first quarter. The contraction compares with a 0.6% expansion in the first quarter and 1.8% growth in the fourth quarter of 2013.
Despite the weaker GDP reading, Hang Seng Bank senior economist Ryan Lam said isn't likely to enter a technical recession, which is typically defined as two consecutive quarters of GDP contraction.
"The second quarter is not the beginning of a downturn," said Mr. Lam, adding that the slowdown is only temporary.
" We remain hopeful of an export turnaround in the second half as growth in developed markets and mainland China picks up," said Mr. Lam, who expects the city's GDP to grow 2.8% in 2014.
Write to Chester Yung at email@example.com
(END) Dow Jones Newswires
August 15, 2014 06:08 ET (10:08 GMT)
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