HONG KONG (Reuters) – Hong Kong’s August retail sales were the worst on record, the government said on Wednesday, as escalating anti-government protests that have gripped the Chinese-ruled city for nearly four months scared off tourists and battered spending.

Retail sales in August fell 23% from a year earlier, government data showed, worse than a 21.48% fall in September 1998, according to Refinitiv data, as violent clashes spread across shopping districts and took a heavy toll on malls.

Cat-and-mouse clashes on Tuesday spread from the shopping district of Causeway Bay to the Admiralty area and then on to the New Territories, with police firing tear gas and water cannon at petrol bomb-throwing activists.

Protesters were out again on Wednesday but there were no reports of serious trouble.

Market analysts say the outlook is overshadowed by the protests and a weak Chinese yuan that translates into lower spending.

Retail sales fell to HK$29.4 billion ($3.75 billion) in August, a seventh consecutive month of decline. July’s drop was a revised 11.5%. In volume terms, retail sales in August fell 25.3%, compared with a revised 13.1% drop in July.

For the first eight months of 2019, retail sales fell 6% in value from a year earlier and 6.9% in volume terms.

“Retail sales will likely remain in the doldrums in the near term, as the worsened economic outlook and local protests involving violence continue to weigh on consumer sentiment and inbound tourism,” a government spokesman said.

The government will monitor the implications for the labor market and the economy, he added.

Hong Kong is facing its first recession in a decade, with the government recently cutting its full-year 2019 growth forecast to 0-1%, down from 2%-3% previously.

(GRAPHIC: Datastream – HK retail sales Aug 2019: here)

TOURISM HIT

Hong Kong’s finance minister had said earlier that anti-government protests were taking a heavy toll on the city’s tourism and retail sectors, while hotels in some locations were only half-full with room rates plunging 40-70%.

August tourist arrivals fell 39.1% on year to 3.59 million, according to the Hong Kong Tourism Board, the biggest decline since May 2003 when an outbreak of severe acute respiratory syndrome (SARS) hit. They were down 30.9% from July. (bit.ly/2oiGiWf)

The number of mainland visitors fell 42.3% in August, accounting for 77.5% of the total.

Many businesses have felt the pain, especially some of the city’s large luxury retailers who rely heavily on mainland Chinese spending, as the protests show no sign of easing.

Sales of jewellery, watches, clocks and valuable gifts plunged 47.4% on-year in August, data showed, after a revised 24.3% drop in July.

Medicines and cosmetics fell 30% in August, compared with revised 16.5% fall in July. Department store sales dropped 29.9% in August, against a 10.4% fall in July.

Hong Kong-based skin care and cosmetics chain operator Sa Sa International (0178.HK) posted 32% year on year drop in its sales in Hong Kong and Macau in August and expected its performance in September to remain “very weak”.

“Uncertainties related to the social unrest in Hong Kong since June 2019 and the trade dispute is leaving no room for optimism on economic growth in 2019,” Bess Tsin, chairman of casual wear group Bossini (0592.HK), said in an earnings statement.

The Hong Kong Retail Management Association had earlier urged landlords to halve rents for six months and expected some retailers may have to sack staff or even shut down.

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