The labor market held generally stable. The seasonally adjusted unemployment rate edged up to 3.2 percent in the second quarter, from 3.1 percent in the first quarter. While overall employment and income conditions remained favorable in the second quarter, the slowdown in the tourism sector of late and its potential impact on the labor market going forward need to be closely monitored, according to Chan.

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Chan said that looking forward, the global economy is expected to remain on a moderate recovery path in the rest of 2014. This, together with an improving mainland economy, should entail a somewhat brighter export outlook for Hong Kong in the period ahead, though the scope of rebound might continue to be held back by the rather fragile recovery of the advanced markets.

On the local front, demand is likely to maintain only a rather slow pace of expansion in the second half of the year. Local consumer sentiment may turn somewhat cautious following the economic growth slowdown in recent quarters.

As for investment, the results of the latest Quarterly Business Tendency Survey showed that business sentiment weakened in the local consumption-related sectors, while cautiousness lingered in the trade-related sectors, reflecting the headwinds from the still uncertain external environment and the recent abrupt turn in tourism-related sectors.

The data also showed that underlying consumer price inflation eased further, to 3.5 percent in the second quarter of 2014 from 3.8 percent in the preceding quarter.

With the modest rise in import prices and weaker economic growth momentum, upside risks to inflation have receded somewhat. Taking into account the actual outturn in the first half of the year, the forecast rates of headline and underlying consumer price inflation for 2014, at 4.6 percent and 3.7 percent respectively in the May round, are revised downward in the current round of review, to 4.4 percent and 3.5 percent respectively.