Hong Kong’s economy expanded last quarter at a slower pace as the spending boom that helped the city exit recession begins to run out of steam.

Gross domestic product rose 1.5% in the April-to-June from a year earlier, according to advance estimates released by the government on Monday (July 31). That was weaker than the median estimate of 3.5% in a Bloomberg survey of economists and slower than the 2.7% growth recorded in the first quarter.

Financial Secretary Paul Chan previewed the data on Sunday in a blog post where he flagged that the year-on-year growth rate “may be slightly slower” than the first three months. Chan said, though, that the economy was still on track to improve this year, as consumer spending continues to pick up and the external environment gradually improves.

Monday’s data showed household spending growing 8.5% in April-to-June from a year prior - weaker than the 12.5% expansion in January-to-March.

The city also saw a pullback in several areas: While goods exports dropped at a slightly slower pace than in the first quarter, those overseas shipments still recorded a double-digit decline. Imports of goods fell 16.1%. Government spending declined 9.6%, compared to a 0.5% rise in the first quarter. 

The city is starting to recover after years of pandemic controls hammered the economy and spurred an exodus of residents. The economy emerged from recession in the first quarter after borders were reopened and spending increased.

Still, the government sounded some optimism over the state of the economy.

“The improving economic situation and prospects should bode well for domestic demand,” a government spokesperson said in a statement accompanying the data. “In particular, improving labour market conditions, together with the government’s various measures to boost the momentum of the recovery, will provide additional support to private consumption.”

The spokesperson warned that “tight financial conditions may impose constraints.” Goods exports will also face pressure, the person said.

Chan said in the Sunday blog post that consumer habits of residents have changed after three years of pandemic controls, which could affect the outlook. Residents have reduced their spending in the evening, and neighboring Shenzhen has emerged as a popular tourist and shopping destination, he said.

  - Bloomberg