Core inflation hits 10-year high of 4.3%
Updated: 2008-02-23 07:44
By Karen Cho(HK Edition)
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Surging food prices and rising gas and electricity costs caused Hong Kong's underlying inflation to increase by 4.3 percent last month - the sharpest jump since May 1998.
And according to the government's latest figures released on Friday , Hong Kong's inflation gauge - the consumer price index (CPI) - jumped 3.2 percent last month.
The CPI is lower because it factors in the government's one-off property-valuation-tax reduction.
Higher food prices were the largest contributor to the special administrative region's inflation jump. Pork and beef prices shot up 48.2 percent and 40.1 percent, respectively, while vegetable prices rose 20.1 percent last month.
The government blamed the recent mainland snow and ice storms for the surge in food prices. Quite simply, crops were destroyed and several shipments were delayed or canceled.
Economists warned that people should expect the food to become even pricier, at least in the first quarter.
"The impact of the snowstorm will persist," said Daniel Chan, a senior strategist at DBS Bank. "It takes time to rebuild infrastructure and re-grow crops. So we can expect that the food supply will continue to be strained in the coming months."
But comparatively speaking, Hong Kong got off easy. Inflation on the mainland last month skyrocketed by 7.1 percent - the highest increase since 1995.
Aside from food, Hong Kong residents saw gas prices, electricity and water increase by 7 percent last month, and the cost of dining out rose almost 5 percent.
Mainland's burgeoning domestic market, the appreciating yuan and the weakening US economy will only serve to intensify Hong Kong's inflationary pressure this year, Chan said.
"The robust mainland market will mean an increase in the demand for food and goods, further stretching the supply," Chan said. "Coupled with the weak Hong Kong dollar, it is foreseeable that inflationary pressures in 2008 will exceed those of last year."
Chan said the underlying inflation for all of 2008 can easily exceed 4 percent unless the government grants more concessions such as the property tax reduction. "If the government includes further concessions in the upcoming budget, there is a good chance that the territory's inflation can be capped at around 2.5 to 3 percent," Chan said.
The government is scheduled to announce its 2008-09 financial budget on Wednesday.
(HK Edition 02/23/2008 page2)