Downturn sees consumer prices rise the least in 4 years

PUBLISHED : Friday, 22 May, 2009, 12:00am
UPDATED : Friday, 22 May, 2009, 12:00am

Consumer prices in Hong Kong last month rose at their slowest pace in four years, increasing just 0.6 per cent year on year, thanks to weakening demand as a result of the economic downturn.

Analysts' consensus estimate was for a 0.9 per cent rise on the consumer price index. Prices rose 1.2 per cent in March.

The last time inflation was this low, prices were still recovering in the wake of the severe acute respiratory syndrome outbreak in 2003.

Smaller increases in rents and food prices, and the impact of government relief measures such as the electricity subsidy, kept inflation in check last month.

Excluding the effect of the relief measures, prices rose 1.9 per cent last month, down from 2.6 per cent in March.

'Inflationary pressures are likely to decrease further in the coming months. This will be an integral part of cost and price adjustments amid the global recession,' a government spokesman said.

There were initial fears of runaway inflation as governments around the world pumped hundreds of billions of dollars into their economies to cushion the impact of the downturn and get bank lending flowing. Now, many economists expect prices to remain depressed or even to fall as consumers save more and spend less.

However, once economies begin to stabilise, significant inflation is still likely. That could cause central banks to put up interest rates to slow the rise in asset prices - which could scupper the economic recovery.

According to the Census and Statistics Department, prices for alcohol and tobacco were up 22.7 per cent year on year last month, though this was largely because of the recent increase in tax on tobacco products.

Housing cost 5.4 per cent more than a year earlier, clothing and footwear cost 3.5 per cent more and food 2.2 per cent more. Dining out cost 2.1 per cent more. Durable goods prices were down 3.1 per cent from a year earlier and transport costs were 0.1 per cent lower.