In the first quarter of 2006, the Hong Kong economy continued the strong upturn, with GDP leaping by 8.2% in real terms, following an already robust 7.3% growth in 2005. Trading and logistics as well as financial services have been the star performers among the various industries.

Externally, merchandise exports attained an even more marked growth in the first quarter, with the Mainland again as the key growth spot. Exports to the European Union fared well, while exports to the US grew further. Exports of services were likewise robust, with both offshore trade and inbound tourism on an upward increase.

As for domestic demand, consumption spending showed a solid increase, benefited from rising employment income and a buoyant stock market. Consumer sentiment remained largely upbeat, although interest rates rose further during the quarter. Overall investment spending sustained distinct growth, having already surged markedly in the fourth quarter of 2005, supported by strengthening corporate profits and increasing confidence in business outlook.

The labour market improved further, with the seasonally adjusted unemployment rate down to a 4 1/2- year low of 5.2% in the first quarter. Reflecting the sustained demand for labour, wages and earnings rose steadily further and job openings continued to surge across the board at end of 2005.

The property market warmed up in the first quarter with increased trading, having gone through some consolidation in the second half of 2005. Sentiment about the market outlook remained generally positive, particularly with market expectation that interest rate hikes would possibly come to a pause soon.

Consumer price inflation remained benign in the first quarter, though edging up slightly alongside the brisk economic expansion. The effects of increasing private housing rentals and higher oil prices have increasingly fed through to the Consumer Price Indices. Yet sustained expansion in production capacity brought about by rising productivity and business investments, coupled with easing import prices, have helped to mitigate the pressures on local prices.

(Information from: Economic Analysis Division; HK SAR government, see more at http://www.info.gov.hk/hkecon/index.htm)