The fall in advertising spending in this year's third quarter offers a grim outlook for consumer expenditure for the rest of 2016 and beyond.

Data from research firm admanGo show that Hong Kong's total advertising spending in the three months to Sept 30 amounted to about HK$10 billion - down 13 percent from a year earlier - according to a local media report. The decline followed the trend set in the previous two quarters when advertising spending slipped 13 percent and 14 percent, respectively.

Advertising spending on television saw the biggest fall of 12 percent, reducing its market share of total ad spending to 30 percent from 31 percent. Real estate advertisement saw its spending on free newspapers cut by 30 percent and spending on radio stations down 36 percent.

Other advertisers that have also cut back spending in the third quarter included cosmetics and skincare product vendors, credit-card issuers, investment services providers and household product sellers. Spending on cosmetics and skincare advertisements in this year's third quarter tumbled 46 percent from a year ago, indicating that vendors have little expectations of a recovery in sales, especially with regard to mainland tourists.

The persistent drop in advertising spending has implications that go far beyond the media industry. It has sent a clear signal that the retail industry - one of Hong Kong's largest employers - is bracing for tougher times ahead.

The retail sector is never ranked with the financial or export sectors as a pillar of the economy. But, its demise could affect the livelihood of hundreds of thousands of workers and their families.

So far, shrinking tourist spending has been blamed for the diminishing retail sales. This is understandable. The Hong Kong dollar's appreciation against most regional currencies has been viewed as having undermined the city's status as a shoppers' paradise in the face of stiff competition from some regional markets.

But, domestic consumption is not seen to be weakening as the unemployment rate has remained low and wages in some sectors, notably construction, have been rising. Retailers can boost sales by passing some of the savings from lower rentals for retail space and reduced advertising spending onto local consumers.

The outlook doesn't have to look all that grim.

(HK Edition 10/26/2016 page1)