Shoppers browse items in a shop in Wan Chai. According to figures released Thursday, the city's underlying inflation rate in December hit 2.8 percent. Ed Jones / AFP

Consumer prices rise 3.1% in Dec, driven by rents and food costs

Hong Kong's inflation accelerated at its quickest pace in almost two years in December driven by increasing rents and rising food prices.

Figures released by the government Thursday show that the city's overall consumer prices rose 3.1 percent year-on-year in December, compared with 2.9 percent in November. December's figures marked the highest level of inflation since February 2009, which also increased 3.1 percent.

Netting out the effects of the government's one-off relief measures, including electricity subsidies, waivers of property rates and public housing rentals, underlying inflation in December hit 2.8 percent, higher than the 2.6 percent seen in November.

Electricity, gas and water prices surged 13 percent in December, due to the fact some households had already used the subsidy from the government, the Census and Statistics Department said on its website.

Food prices increased 4.3 percent last month while housing prices rose 2.5 percent compared with the same period in 2009. Both expanded faster than the readings of 3.8 percent and 2.1 percent in November.

"Unlike the mainland where food prices are slowing down, Hong Kong's food prices are now trending upwards at a faster pace due to buoyant demand and a depreciating currency," said Irina Fan, a senior economist with Hang Seng Bank.

The mainland's consumer price index rose 4.6 percent in December from a year earlier, compared with 5.1 percent growth in November, the National Bureau of Statistics said Thursday.

Food prices, though surging 7.2 percent year-on-year in December, was the lowest reading since August.

"The (Hong Kong) economy is likely to face higher inflationary pressures in the coming months, due partly to the pick-up in import prices amid rising global food and commodity prices and partly to the gradual building up of domestic price pressures along with the strong pace of economic expansion," said a government spokesman.

The spokesman added that the Hong Kong government will continue to monitor the inflation situation closely, especially its impact on lower-income people.

Fan said that without some of the government's one-off measures in the wake of the financial crisis in 2008, Hong Kong's full-year CPI reading in 2010 would have been at least 1.2 to 1.5 percentage points higher than the 2.4 percent rise that was officially calculated.

In 2009, the city's inflation only accelerated 0.5 percent compared with 2008 .

Inflationary pressure could worsen notably this year, with headline CPI reaching 5 percent if the government stops offering further one-off measures to help the city's residents cope with price hikes, Fan said.

She added that the city's rents are expected to retain their double-digit ascent, while food prices also see no sign of being lowered in the near term, particularly as the lunar new year draws closer.

China Daily

(HK Edition 01/21/2011 page2)