March 2, 2017 / 9:12 AM / 8 months ago

UPDATE 1-Hong Kong Jan retail sales slip as strong HK$ hurts business

* Jan retail sales fall 0.9 pct y/y in value, down for 23 months

* Jan jewellery sales fall 3.9 pct, vs 2.3 pct rise in Dec

* Tourist arrivals up 4.8 pct in Jan, vs 5.4 pct rise in Dec

HONG KONG, March 2 (Reuters) - Hong Kong’s retail sales fell for the 23rd straight month in January, with a strong local dollar hurting tourism and business activity although the drop narrowed against the previous month.

Retail sales slid 0.9 percent from a year earlier to HK$43.1 billion ($5.55 billion) in value terms, after a 2.9 percent decline in December, government data showed on Thursday.

In volume terms, January sales dropped 1.4 percent on-year, compared with a revised 2.9 percent decline in December.

“The near-term outlook for the retail sales business will continue to depend on the performance of inbound tourism and on whether local consumer sentiment would be affected by the various uncertainties in the external environment,” the Hong Kong government said in a statement.

The government also said January figures might be affected by the difference in timing of the Lunar New Year, which fell in late January this year but early February last year.

Once a favourite shopping destination for mainland Chinese, tourists are now heading to other cities, including Japan and South Korea which offer more affordable options for travellers.

The Hong Kong dollar is pegged to the U.S. currency, which means it is prone to strengthen when other Asian currencies weaken.

The city’s retail sales shrank for the third year in a row in 2016 and by the most in nearly two decades with fewer tourists.

The Hong Kong Retail Management Association has estimated a 3-4 percent decline in retail sales in 2017 amid uncertainties, narrowing from an 8.1 percent drop in 2016.

“I still expect a mild decline this year, but we are seeing light at end of the tunnel,” said Thomson Cheng, chairman of the association.

“The sector will bottom out this year and will walk out of the woods in 2018, but we are not sure if it will be in L-shape, or V-shape or U-shape when it walks out of the woods,” Cheng added.

Tourist arrivals in January rose 4.8 percent from a year earlier to 5.48 million, slowing from a 5.4 percent rise in December. (bit.ly/2lOziN8)

Mainland China visitors, who account for 79.5 percent of the total, rose 7.7 percent to 4.35 million in January after a 6.1 percent increase in December.

Many retailers are switching their focus to local customers as tourism remains sluggish.

Sales of jewellery, watches, clocks and valuable gifts in Hong Kong in January fell 3.9 percent in value terms, against a 2.3 percent rise in December.

Last month, jewellery retailer Chow Tai Fook Jewellery Group Ltd saw its retail sales value in Hong Kong and Macau falling 11 percent on year during the Lunar New Year period while same store sales declined 7 percent.

$1 = 7.7622 Hong Kong dollars Reporting by Donny Kwok; Editing by Jacqueline Wong

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