The economy grew 12 per cent year on year in the second quarter, significantly up from 7 per cent in the first quarter and was the fastest growth in four years. The robust numbers prompted the Government to revise its full year GDP forecast to 7.5 per cent from 6 per cent.

Acting Government economist Elly Mao said: “We believe 7.5 per cent growth is achievable. At the same time, we should see inflation coming back, although not by too much.”

Surge in exports and domestic consumption

External trade was vibrant in the second quarter, accelerating to 18 per cent growth. The remarkable performance was characterised by a continued surge in exports to the East Asian and European markets with growth up 10 per cent, as well as a further pick-up to the US market. Because Hong Kong produces few goods of its own, the positive export figures point to the robust health of its shipping, logistics and trade services.

In the fastest growth spurt in more than a decade, local consumers were back in the shopping malls as spending shot up by 11.6 per cent, up from 6 per cent in the first quarter. According to the Government, “this was manifested in almost all major categories of consumer goods and services.”

With inbound tourism, offshore trading and exports of transportation services thriving, services exports were up 31 per cent. Transhipment of Chinese mainland goods through Hong Kong ports rose by 18 per cent while re-exports, comprising 90 per cent of all exports, increase 19 per cent.

Hong Kong’s corporate sector also found surer footing as well as stronger business sentiment as business investment leapt 13 per cent in real terms year on year.

“This reflects the improved investment sentiment of the business community and their confidence in the return of growth in Hong Kong,” said Ms Mao stressing that firms spent 26 per cent more on machinery, equipment and computer software than during the corresponding period last year.

Full report Economic situation in second quarter of 2004 and updated GDP