Hong Kong’s Deflation Reversed As Consumer Prices Begin To Rise

by Mary Swire, Tax-News.com, Hong Kong

26 August 2004

After more than five years of declining prices, Hong Kong’s economy has begun to emerge from a long deflationary period as the Consumer Price Index recorded a 0.9% year to date increase, according to the Census and Statistics Bureau.

The figures show that the rise in the CPI index was driven by a 13.5% increase in gas and water prices, a 7.5% increase in the price of clothing and footwear and a 3.1% hike in food prices.

However, house prices remained depressed, sinking a further 2.8%, whilst durable goods prices also fell, by 1.8%.

The government welcomed the data, and a spokesman announced that the overall rise in the index reflects improved economic conditions and increasing consumer confidence.

Economists expect inflation to steadily accelerate during the remainder of the year. However, some have warned that rising prices may have been driven more by the escalating price of crude oil on the global markets rather than by rising consumer demand.

The long period of deflation, which began in late 1998, has hit the property sector particularly hard, where prices have fallen some 70%.

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