Economy | Q2 improvement suggests recession is easing

Macau’s economy contracted by 7.1 percent year-on-year in real terms during the second quarter of 2016, showing signs of improvement compared to the first quarter of 2016, which was down 13.3 percent year-on-
year, according to a statement from the Statistics and Census Service (DSEC).
External demand for Macau’s goods and services remained weak in this period, as was highlighted by a year-on-year contraction of nearly a quarter (-24.7 percent) in the export of goods; the same as in the previous quarter.
In the same period, the export of gaming services and tourism services fell by 12 percent and 7.4 percent respectively, less than the decline observed in the first quarter of 17.1 percent and 11 percent respectively.
Domestic demand experienced continued slowdown, of which private consumption expenditure diminished by 2.2 percent. In addition, the investment and imports of goods decreased by 15.2 percent and 16.2 percent respectively.
On the other hand, the government final consumption expenditure grew by 4.5 percent.
According to DSEC, residents tended to be cautious with their spending during this period, with private consumption expenditure dropping by 2.2 percent year-on-year. Household final consumption expenditure fell be 2 percent in the period.
Government final consumption expenditure registered a larger increase, expanding by 4.5 percent year-on-year, higher than the 1.5 percent growth year-on-year growth of the first quarter. Compensation to public employees and net purchases of goods and services went up by 3 percent and 7.3 percent respectively.
Meanwhile, in the first half of 2016, Macau’s economy contracted 10.3 percent in real terms compared to the first half of last year.
Macau’s economy has been pummeled as gambling revenue plunged 26 straight months in July after China’s crackdown on corruption scared off high-
stakes VIP gamblers. City officials have sought to diversify the economy by pushing operators to build family-friendly resorts that offer more entertainment options aside from gambling.
Macau gaming stocks mostly advanced before the economic data was released, led by Sands China Ltd. which rose 3.5 percent to HKD31 by the close of trading in Hong Kong. The Bloomberg Intelligence Macau gaming stocks index rose 1.4 percent.
The gambling slump has seen signs of easing in recent months with the shift to new resorts that focus on tourists and recreational gamblers. Galaxy Entertainment Group Ltd. last week reported better-than-expected earnings boosted by its new resorts. Wynn Palace opened this month while Sands China Ltd.’s Parisian will debut mid-September.
Gross gaming revenue fell 9.2 percent in the three months ended June, the smallest drop since the third quarter of 2014. That comes as revenue at gaming tables frequented by recreational gamblers, also known as the mass market, narrowed to 1.1 percent following casino operators’ shift to target tourists. By contrast, VIP baccarat – the favored card game for high-stakes gamblers in Macau – plunged 15.7 percent.
Macau is expected to announce gaming revenue for August tomorrow. DB/Agencies