HONG KONG (BLOOMBERG) - Hong Kong's economy expanded faster than analysts forecast in the second quarter as rising wages and low joblessness fueled spending.
Gross domestic product expanded 0.4 per cent in the three months through June from the previous three months, the government said, slowing from a revised 0.7 per cent expansion in the March quarter and beating the median estimate for 0.2 per cent growth.
GDP may expand by 2 per cent to 3 per cent this year, from a previous prediction of 1 per cent to 3 per cent.
The economy was supported by domestic consumption even as luxury spending by Chinese tourists slumped. Such spending may weaken further after the steepest yuan depreciation in two decades this week. While trading volumes on the city's exchange surged in the second quarter because of the Shanghai-Hong Kong stock connect link, the market plummeted in July.
"The second half will be more difficult," said Kevin Lai, a Hong Kong-based economist at Daiwa Capital Markets. "For Chinese tourists, Hong Kong is less attractive as retail goods are more expensive with the yuan devaluation."
The domestic sector remained "remarkably resilient" in the second quarter, cushioning the economy against a lull in external trade, the government said. Private consumption expenditure grew 6 percent from a year earlier, while investment expenditure increased 6.5 per cent.
Economists forecast 2.5 per cent growth for 2015, according to the median estimate analysts surveyed by Bloomberg News.