US dollar doldrums to hit life's luxuries
Wine lovers and holidaymakers will have to pay more for life's little luxuries as the weakening US dollar pushes up retail prices on imports, with other goods set to follow.
Economists are predicting a consumer price rise after the US dollar slumped by about 10 per cent against other major currencies, including the Japanese yen, the Euro and sterling over the past month.
The Hong Kong dollar is also affected because of the peg with the US dollar.
Antonio Koo, managing director of wine importer Ponti Trading, said its import costs had increased by more than 10 per cent in the past two months purely because of the US dollar's depreciation against the Euro.
'Most wine importers have no choice but to pass on at least a good portion of the cost increases in order to survive or risk closing the business,' Mr Koo said.
'Yet, with the severe economic downturn in Hong Kong, many customers would rather trade down to a lower quality wine for the same price than pay a higher price for the same wine they were drinking previously.'
Travel Industry Council executive director Joseph Tung Yao-chung said there would be pressure to increase tour fares this summer if the situation got any worse.
'According to our guidelines, whenever there is a change in currency the agent can change the fare accordingly,' he said.
For instance, Hong Tai Travel last week increased its rate for a twin room at a four-star hotel in Tokyo from $890 a night to $920.
Hong Kong Retail Management Association chairman Yu Pang-chun said the effect on prices would ultimately depend on the product, but retailers would be cautious about passing on any increment.
'Obviously, if imports are from Europe, especially the higher-end items, it will make a big difference,' he said.
'Retailers will be gauging consumer reaction so if they do pass on the increase they would do so very cautiously and examine their sales figures.'
Diane Chiu, spokeswoman for Wellcome supermarket, said a weaker dollar would affect promotional prices or unplanned purchases to replace goods that had sold out.
But in the short-term supplier contracts were set at an agreed price and the company usually kept sufficient stock to satisfy market needs.
Teresa Pang Sau-kwan, spokeswoman for rival chain store ParknShop, said that the currency situation would increase the cost of goods imported from Australia, Europe and other countries that were not pegged to the US dollar.
'It depends how far the dollar slides as to whether this will affect our retail prices,' Ms Pang said.
A spokesman for electrical goods retailer Broadway said its charges were set by local distributors and had not yet been affected by currency changes. In the long-term, prices would depend on the local agency or distributor arrangement.
Citibank senior economist Joe Lo said a moderate decline in the US dollar would force prices up but predicted it would not see a return of inflation in Hong Kong.
A Finance Bureau economist said although a weakening of the US dollar to raise import and consumer prices was expected, the affect would be restrained due to slack demand in the international market and subdued inflation in major supplier economies.
