HONG KONG Hong Kong's May retail sales rose 18.4% from a year earlier in the sixth consecutive month of growth thanks to the revival of inbound tourism and positive consumption sentiment which should support growth in coming months, the government said on Monday.

Sales increased to HK$34.5 billion ($4.40 billion). That compared with a revised 14.9% rise in April and 40.8% growth in March.

Strict COVID-19 restrictions have weighed on Hong Kong's economy since early 2020. But all border checkpoints were reopened fully in early February and the city dropped its COVID-19 mask mandate from March 1 in a move to lure back visitors and restore normal life.

The government launched a promotional campaign earlier in March called "Hello Hong Kong" to bring back tourists and businesses and also launched a "Happy Hong Kong" campaign in late May to boost local spending and the economy.

"Retail sales should continue to improve in the coming months," a government spokesperson said. "The number of incoming visitors should continue to increase as transportation and handling capacity expand further."

In volume terms, retail sales increased 16.5% year-on-year in May. That compared with a revised 13.1% growth in April and 39.3% growth in March.

"Local consumption demand will continue to be supported by the improved labour market conditions, disbursement of the second installment of consumption vouchers, and promotional efforts by the government and the industry." the spokesperson added.

The city's industry body Hong Kong Retail Management Association launched "Happy Hong Kong Shopping Festival" from July 1 to August 31 with about 6,000 stores participating, offering discounts and other retail promotion to boost consumption.

Hong Kong's seasonally adjusted unemployment rate stayed at 3.0% in the March to May period, the same as the previous quarter, after easing for 12 consecutive quarters.

The economy grew 2.7% in the first quarter from a year earlier thanks to the strong recovery of tourism and domestic demand, which should remain drivers of growth this year. The government has maintained its economic growth forecast of between 3.5% and 5.5% for 2023.

Tourist arrivals in Hong Kong in May fell slightly to 2.83 million from 2.89 million in April, but jumped sharply as compared with 18,710 visitors in May 2022 when China was still observing strict controls to prevent the spread of COVID-19.

Among the arrivals, mainland Chinese visitors eased slightly to 2.29 million in May from 2.31 million in April, Hong Kong Tourism Board data showed.

In May, sales of jewellery, watches, clocks and valuable gifts, which before the pandemic were mostly to mainland tourists, surged 51.8% from a year earlier as compared to a 75.1% jump in April, data showed.

($1 = 7.8342 Hong Kong dollars)

(Reporting by Donny Kwok and Twinnie Siu; Editing by Philippa Fletcher)