HONG KONG MONETARY AUTHORITY Annual Report 1996
HONG KONG MONETARY AUTHORITY
Along with the improved economic activity, domestic credit expanded more strongly by 15.8% in 1996, up from 12% in 1995. While trade financing has been sluggish due to the slow-down in external trade, other loans for use in Hong Kong grew at a fast rate of 17%, underpinned by the buoyant property market and the recovery in consumer spending.
In part reflecting a net inflow of funds, broad money supply, as measured by Hong Kong dollar M3, registered a growth of 19% in 1996, faster than the domestic credit expansion of 15.8% and nominal GDP growth of around 10%.
RISE OF PRIVATE CONSUMPTION AND INVESTMENT
Private consumption recovered somewhat from the weak performance in 1995, rising by 4.4% in 1996. Interest rate cuts in December 1995 and February 1996 provided the basis for the revival of consumer sentiment, while the positive wealth effect stemming from the rises in stock and property prices filtered through to higher spending power (Chart 1).Towards the latter part of the year, there was a broad-based recovery of consumer confidence as the job market improved.
Investment in building and construction continued to grow strongly in 1996. In particular, private sector construction resumed positive growth from the June quarter of 1996, having declined for five quarters in a row. The buoyant residential property market has stimulated property development. Public sector investment growth slackened in 1996 as a number of projects under the airport programme were gradually winding down (Chart 2).