One of the primary causes for this growth has been the remarkable rise in private consumption, which was up by 9.7% over 2006's corresponding level during Q-3. Retail figures suggest that, in particular, consumption of durable goods and food and beverages was well above average. Along with a high level of spending on services which constitutes the main part of the average household's budget, this has driven a growth in consumption that has only been bettered twice in the past 15 years.

Of course, international trade has remained a major factor in the region's overall economic growth. Trade, and the services which support it, have buoyed up Hong Kong's economy for many years. Once again, 2007 saw strong growth rates in imports and exports both of merchandise and services.

However, that is not to say that there were not warning signs in the economy during 2007. Domestic consumption may have risen dramatically, but capital investment has been in decline for a while now. And it is not just investment that has been volatile of late. Prices rose quickly towards the end of 2007, with figures suggesting that external pressure is affecting Hong Kong's domestic prices. Although Q-3's 1.6% rise in prices was not particularly high, overall inflation (taking account trade into consideration) was around 3.4%, the highest level since the first quarter of 1998.

Looking ahead to 2008, Hong Kong's economy should see around 5% real growth over the year, barring a recession in the United States. Inflation should average at 3% for the year, but again external factors (such as rising oil prices or a depreciation of the U.S. dollar against the renminbi) could affect this forecast. Ultimately, Hong Kong's economy will probably have a far tougher time in 2008 than it did in 2007.

David O'Rear is the Chief Economist of the Hong Kong General Chamber of Commerce.