People cross Hennessy Road at the busiest intersection in Causeway Bay, a shoppers' favorite spot on Hong Kong Island.  Bloomberg News

HONG KONG: Retail sales in Hong Kong continued to decline in May, dropping 6.2 percent by value from a year ago due to swine flu and a sharp fall in tourist arrivals.

This is the fourth straight month retail sales have fallen after April witnessed a drop of 4.3 percent, government data showed.

For the first five months combined, total retail sales decreased by 4.4 percent in value or 5.6 percent in volume compared with the same period a year earlier.

According to the Census and Statistics Department, total retail sales in May was HK$21.6 billion.

Sales of motor vehicles and parts decreased the most, by 32.2 percent in volume, followed by jewelry, watches and clocks, and valuable gifts, which recorded a 10.9 percent decline.

The volume of sales of commodities in supermarkets however increased by 0.6 percent in May compared with a year earlier, due mainly to price reductions on goods in recent months.

"Consumers were still cautious in spending on such big-ticket items as motor vehicles and jewelry, yet retail sales of some other consumption items held stable or showed some relative improvement," said a government spokesman. "Retail sales may have also been dragged by the decline in visitor arrivals in that month."

Tourist arrivals plummeted 13.5 percent in May as the recession held up Western tourists and swine flu depressed traveling.

Analysts are split on the outlook for the retail sector.

Bleak sentiments have been sparked by the small improvement in unemployment and leading indicators in May, such as the Purchasing Manager's Index. Export, a pillar industry of the city, is still seeing a double-digit decline.

There is also optimism as some believe confidence will be lifted by promising figures from the US and the mainland in the coming months.

"June may herald a turnaround," said Castor Pang, chief strategist at Sun Hung Kai Financial, noting that the city's stock market and property market have already showed signs of pick-up and the "wealth effect" will soon spread into other sectors.

"A sustainable confidence will be the key to revive the retail sector," said Pang. "If the US and mainland keep sending promising signals in the following months, Hong Kong consumers would soon pick up their confidence."

(HK Edition 07/03/2009 page3)