Retail sales sink 14.6% y/y in January

Chinese New Year could improve market, though.

Hong Kong retail sales in January were at HK$46.6 bn, down 14.6% y/y by value.

According to a research note from Barclays, this missed the Bloomberg consensus estimate looking for 6.1% y/y decline.

Meanwhile, January retail sales volume decreased by 13.9% y/y. January retail sales weakened from December, which saw 3.9% decline.

The report noted, however, that given the later timing of the Chinese New Year this year (which could impact shopping patterns around January and February), Barclays believes January and February combined performance should be better.

Here's more from Barclays:

These January Kong Kong trends were weaker than Global Blue data which showed that Chinese spending overseas was +34% y/y in January. With a strong dollar, shopping could be more attractive at other destinations compared to Hong Kong.

We continue to believe that Chinese visitor spending is diverging to other travel destinations outside of Hong Kong, and expect slow Hong Kong retail growth this year.

Furthermore, there has been news that the Hong Kong Chief executive is looking to speak to Beijing government on the possibility of limiting mainland visitor arrivals to Hong Kong; we believe these also offer risks to Hong Kong retailers.

Visitor arrivals growth at 3%; weakening spending power: January saw mainland Chinese visitor arrivals grow only at 3% y/y. Same-day visitor arrivals grew by 8% y/y and overnight visitors declined by 5% y/y.

Major categories:

Jewellery and watches saw wider decline at 21.4% y/y in January: This is wider than the 16.3% decline seen in December.

Clothing and footwear sales further softened to see 13.8% y/y decline in January: This compares to the 4.0% y/y decline seen in December.

Department stores sales down 11.3% y/y in January: This a weaker compared to the 5.6% y/y decline in December.

Medicines and cosmetics sales stayed flat y/y in January: This is compared to the 4.2% y/y growth seen in December.

Food, alcohol and tobacco; and consumer durables sales reverse to decline, distorted by lunar year timing: Sales of food alcohol and tobacco reversed to a 8.7% y/y drop from the 7.4% y/y growth seen in December.

Consumer durables sales also turned to a 20.3% y/y decline in January, compared to the 3.8% y/y growth in December.