PREVIEW-HK May retail sales growth to ease as tourism slows

* What: Hong Kong's May retail sales

* When: July 3 at 4.15 p.m. (0815 GMT)

* Retail sales growth weakens on slower tourism, spending

By Susan Fenton

HONG KONG, July 2 (Reuters) - Hong Kong's retail sales in
May probably rose 15 percent by value, decelerating from April
as tourism slowed and an uncertain global economic outlook made
consumers more cautious, a Reuters survey shows.

"We might be seeing more caution given the external
environment and stock market volatility," said Kelvin Lau, an
economist at Standard Chartered Bank. "But the slowdown in
sales growth is nothing alarming. We're still seeing decent job
security and the economy is doing reasonably well."

Annual inflation in May hit 5.7 percent on the back of
rising food prices and housing rents leaving many consumers,
especially from the lower income groups that spend
proportionately more of their wages on food, with less cash to
spend.

April sales, totalling HK$22.8 billion (US$2.9 billion),
grew 18.7 percent by value from a year earlier.

Apart from February, sales have marked high double-digit
growth each month since last September, but they are likely to
slow throughout the second half of this year, economists said.

The value of sales is being boosted by inflation but real
sales growth, as measured in volume terms, has been slowing
since January, with the exception of February when spending was
distorted by the Lunar New Year holiday.

The survey forecast the volume of sales in May grew 9.2
percent from a year earlier, down from 11.6 percent in April.

Slower growth in tourism would also have dampened retail
sales growth in May as visitor arrivals rose only 6.3 percent
from a year earlier after averaging double-digit growth in the
past year. Tourism contributes to 25 percent of retail sales.

China shortened its traditional weeklong Labour Day holiday
in May to three days this year.

Consumer spending is still strong, helped by a drop in the
unemployment rate to 3.3 percent, a 10-year low, and wage
growth.

But the stock market has fallen about 20 percent in the
first half of this year, after a 40 percent rally in 2007.

Analysts' forecast that the stock market could fall further
has prompted investors to rein in spending, economists say.

Consumption is expected to be the main driver of economic
growth this year, offsetting an expected drop in export growth
later this year.

A Reuters poll forecasts economic growth of 5 percent this
year, well down after averaging 7.3 percent annually for the
past four years.

Forecasts for May retail sales by value and volume
(percentage change from a year earlier):

Value Volume
Hang Seng Bank 18.2 11.0
Standard Chartered Bank 16.7 n/a
ING Financial Mkts 16.5 9.5
HSBC 15.0 7.8
Citigroup 14.0 7.0
Lehman Brothers 13.3 n/a
DBS Bank 13.0 6.0
UBS n/a 10.9
JP Morgan n/a 9.2
--------------------------------------------------
Median 15.0 9.2
(US$=HK$7.8)
(Editing by Jonathan Hopfner and Jacqueline Wong)