Hong Kong’s retail sales rose in January for the second consecutive month as consumer sentiment improved, with further relaxation of pandemic-related rules expected to provide an additional boost, the government said on Thursday.

January retail sales grew 7 per cent from a year earlier in value terms to stand at $4.61 billion. That compared with $4.29 billion in December, when retail sales were revised to an increase of 1.2 per cent 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.

The city dropped its Covid-19 mask mandate from March 1 in a move to lure back visitors and restore normal life more than three years after stringent rules were first imposed in the financial hub.

The government also launched a promotional campaign earlier this month called “Hello Hong Kong” to bring back tourists and businesses.

“The continued return of economic activities to normalcy and further rebound in the number of visitor arrivals will benefit the retail sector,” a government spokesperson said, adding that improved labour market conditions will provide support.

In volume terms, retail sales in January increased 5.1 per cent from a year earlier. That compared with a revised 0.6 per cent fall in December.

The January retail sales value and volume were the highest since April 2022 when it was up 11.7 per cent and 8 per cent, respectively.

Hong Kong 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 city’s economy this year.

The Asian financial hub’s economy is expected to grow 3.5 per cent-5.5 per cent this year after shrinking 3.5 per cent in 2022.

Tourist arrivals in Hong Kong in January soared nearly 70 times from a year earlier to 498,689. That compared with about 16 times growth in December to 160,578.

The city’s seasonally adjusted unemployment rate eased to 3.4 per cent in the November to January period, from 3.5 per cent in the October to December period.

In January, sales of jewellery, watches, clocks and valuable gifts, which before the pandemic were mostly to tourists from mainland China, jumped 23.1 per cent from a year earlier, following a 4.9 per cent decline in December, data showed.

Sales of clothing, footwear and accessories in January grew 14.7 per cent on the year after a 0.9 per cent increase in December.

Online retail sales in January decreased 4.2 per cent year-on-year in value terms, compared with a 12.8 per cent growth in December.

• Reporting by Donny Kwok and Twinnie Siu; Editing by Shounak Dasgupta, of Reuters.