* Dec retail sales fall 2.9 pct y/y in value, down for 22 months
* Dec jewellery sales rise 2.3 pct, ending 27 months of decline
* Retail sales value falls for 3rd consecutive year
* Tourist arrivals rise 5.4 pct in December, up 4.8 pct in January
By Donny Kwok
HONG KONG, Feb 3 (Reuters) - Hong Kong’s retail sales shrank for the third year in a row in 2016 and by the most in nearly two decades, hurt by the city’s economic downturn and fewer tourists from mainland China.
The prolonged slump in the once-flourishing retail industry may be bottoming out, but analysts say it is too early to call for a recovery yet as store closures and lay-offs continue.
“Looking ahead, the near-term outlook for retail sales business will still depend on whether the recent improvement in inbound tourism could gain more traction and the extent to which local consumer sentiment would be affected by various external uncertainties,” the government said in a statement.
Overall retail sales slid 8.1 percent to HK$436.6 billion ($56.3 billion) in value terms, its biggest percentage drop since 1998 when sales fell 16.7 percent during the Asian financial crisis. Retail sales volume was down 7.1 percent last year, government data showed on Friday.
In December, retail sales value slid for the 22nd straight month, down 2.9 percent from a year earlier to HK$42.4 billion. That compared with a revised 5.4 percent fall in November.
A narrower decline in December reflected a revival in visitor arrivals, the government said.
In volume terms, December sales fell 2.8 percent from a year earlier.
Hong Kong, once a favourite shopping destination for mainland Chinese, has been facing greater competition from Japan and South Korea. Hong Kong’s simmering political tensions with China and a strong local dollar - pegged to the U.S. currency - have added to retailers’ frustrations.
The city’s retailers have scaled back expansion and are moving out of expensive shopping districts to cope with hard times.
“We can’t say the adjustment has come to an end, nor has it come to a stage where we are about to rebound,” said Kent Wong, managing director of Chow Tai Fook Jewellery. The jeweller aims to close 5 to 6 stores in the city in 2017.
Sales of jewellery, watches, clocks and valuable gifts rose 2.3 percent in value terms, ending 27 consecutive months of decline. Department store sales value fell 3.2 percent in December.
Total visitor arrivals fell 4.5 percent to 56.65 million in 2016, of which mainland visitors dropped 6.7 percent to 42.78 million.
In December, the arrivals number rose 5.4 percent, an improvement against a 2.1 percent fall in November and 2.4 percent decline in October. Mainland China visitors rose 6.1 percent in the month. (bit.ly/2kiGRvZ)
The government said on Thursday the total number of visitors rose 4.8 percent in January, while mainland visitors climbed 7.5 percent.
“So we are seeing an increase in tourist arrivals starting from the last quarter of last year and it carried on through December to January,” said Gregory So, Secretary for Commerce and Economic Development, but added it was premature to predict any trends.
$1 = 7.7589 Hong Kong dollars Additional reporting by Twinnie Siu; Editing by Jacqueline Wong