Hong Kong's retail sales rose in December as economic sentiment improved alongside further relaxation of social distancing measures, the government said on Friday.

December retail sales grew 1.1% from a year earlier in value terms to stand at HK$33.7 billion ($4.30 billion). That compared with HK$29.5 billion in November, when retail sales fell a revised 4.1% from a year earlier.

Strict Covid-19 restrictions have weighed on Hong Kong's economy since early 2020, grinding tourism to a halt and battering sales at bars, restaurants and shops.

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Apart from the wearing of masks, which remains compulsory, Hong Kong has cancelled all its stringent Covid-19 rules and arrivals no longer need to do mandatory PCR tests, while the city's vaccine pass has been scrapped and quarantine-free travel with mainland China has been resumed.

Last week, the city's top leader John Lee said he aims to lift all Covid-19 restrictions this year.
"The return of economic activities from the epidemic to normalcy and an expected increase in inbound visitors should bode well for retail sales performance," a government spokesperson said, adding that improved labour market conditions were also lending support.

The Asian financial hub has been battered by its own pandemic measures and spillover from China's zero-Covid policies, but recovering consumer spending on the mainland and a rebound in travel are expected to help the economy this year.

However, Hong Kong faces risks from inflationary pressure and aggressive monetary tightening in advanced economies. Higher borrowing costs and a pessimistic economic outlook have hit asset prices, dragging 2022 private home prices down 15.6% in the first annual drop since 2008.

In volume terms, retail sales in December decreased 0.7% from a year earlier. That compared with a 5.3% fall in November.

For the whole of 2022, the total retail sales value eased 0.9% as compared with the same period a year earlier, and the volume was down 3.4%.

Tourist arrivals in December soared about 16 times from a year earlier to 160,578. For 2022, the arrivals jumped 561.5% from the previous year to 604,564.

The city's seasonally adjusted unemployment rate eased to 3.5% in the October to December period.
In December, sales of jewellery, watches, clocks and valuable gifts, which before the pandemic relied heavily on tourists from the mainland, fell 3% from a year earlier, following a 8.3% decline in November, the data showed.
Sales of clothing, footwear and accessories in December grew 0.3% on the year after a 15.4% drop in November.

Online retail sales in December rose 12.9% year-on-year in value terms, compared with 9.4% growth in November. They jumped 20.8% for the whole of 2022.