Inflation balloons to 35-month high
Updated: 2011-07-22 06:31
By Joy Li(HK Edition)
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Shopper choose vegetables at a food market in Hong Kong. Dale de la Rey / Bloomberg |
Economists fear full blown inflation shock may follow
Rising rents, household services charges and prices of pork have nudged Hong Kong's inflation rate to a 35-month high, an upward pressure that will continue to weigh on the local economy in the coming months, warned the government.
Overall consumer prices, as measured by the composite Consumer Price Index (CPI), rose by 5.6 percent in June over the same month a year ago, a quickened pace compared to the 5.2 percent seen in May, the Census and Statistics Department said on Thursday.
For the first half of 2011 as a whole, the CPI rose by 4.5 percent over a year earlier.
June's inflation rate represented the fastest pace since July 2008.
Netting out the effects of all government's one-off relief measures, the underlying inflation rate was 5.5 percent in June, higher than May's 5.1 percent.
"Private housing rentals and food prices were the two major driving forces accounting for about 70 percent of the year-to-year rate of increase in the underlying Composite CPI in June," said a government spokesman.
The spokesman added that the economy will continue to face upward price pressures in the coming months.
"While global food and commodity prices are likely to stay elevated, domestic cost pressures may also increase as a result of the brisk expansion of the local economy since early 2010," the spokesman said.
Hong Kong's GDP grew by a better-than-expected 7.2 percent in the first quarter of this year from a year ago, helped by strong exports and free-spending tourists from the mainland.
A breakdown shows that private housing rental costs rose 7.1 percent and food prices went up 7.2 percent.
Kevin Lai, macro-economist at Daiwa Securities, said he believes that "a full-blown inflation shock" looms for Hong Kong and the inflation rate may hit as high as 7.8 percent by September.
"We can see that inflation has spread to services like transportation and education," said Lai. "I am very worried about how long households and enterprises can endure the pain since inflation can kill an economy."
He expected local economic growth to slow down sharply in the next six months.
According to a MasterCard Consumer Confidence survey released on Tuesday, Hong Kong consumers have become less optimistic.
The latest survey reading fell to 69.9 from 74.7 six months ago and 76.6 a year ago.
Optimism fell on all key indicators apart from the stock market.
Quality of life was down, receiving a rather gloomy 49.9 after sliding from a positive 57.7 six months ago.
Also down from the previous survey were regular income, to 81.4 from 83.2, employment, to 71.5 from 80.4, and the economy, to 69.4 from 77.9.
The survey taken across Asia in April interviewed 10,374 consumers.
joyli@chinadailyhk.com
China Daily
(HK Edition 07/22/2011 page1)