Lunar New Year price rises push inflation to 13-month high

PUBLISHED : Tuesday, 23 March, 2010, 12:00am
UPDATED : Tuesday, 23 March, 2010, 12:00am

Inflation edged up almost 2 per cent over the first two months of this year as the Lunar New Year holiday pushed up consumer prices 2.8 per cent in February, the most in 13 months, government data shows.

Last month's year-on-year price increase was up from January's 1 per cent rise, while the underlying inflation rate also jumped 1.6 per cent from almost zero in January, Census and Statistics Department figures show.

The underlying inflation rate is compiled without the effects of various government one-off relief measures such as the electricity charge subsidy. In January and February, the combined inflation rate rose 1.9 per cent, or 0.8 per cent without the relief measures.

Taking data from the two months together gives a more accurate reading of consumer prices as they are usually distorted by the timing of the Lunar New Year holiday. Everything from package tour charges to the prices of poultry and fresh vegetables usually rise to capitalise on the influx of mainland shoppers visiting during the holiday period.

Last year, prices rose 3.1 per cent in January and 0.8 per cent in February.

'Overall price pressures have inched up but were still tame in early 2010,' a government spokesman said.

'The overall, inflation rate, whilst likely to climb further as the economic revival takes hold, is likely to remain relatively modest in the near term.'

The government expects inflation of 2.3 per cent this year.Last month, prices rose the most for utility charges, up 62.8 per cent, mainly because some households had used up the government's electricity charge subsidy.

Alcoholic drinks and tobacco jumped 19.2 per cent, food increased 4.7 per cent, clothing and footwear were up 2.6 per cent while transport costs rose just 1.5 per cent.

Prices of durable goods slipped 1.5 per cent last month.

Year-on-year price changes tend to lag behind other economic data.

Many economies around the world have already experienced considerable declines in consumer prices because of the global financial downturn.

Consumers tend to curb or hold off on spending in an economic downturn, reflecting weak demand due in part to uncertainties about the job market.