Inflation figure hides the real pain

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

Hong Kong's year-on-year inflation stood at 2.6 per cent last month - the same as in September, according to official figures released yesterday.

Despite the seemingly mild rate, an economist warned lower-income families would feel deeper pain than reflected by the official figure.

Dr Billy Mak Sui-choi, an economist at Baptist University, said a mere look at the composite price index (CPI) of 2.6 per cent could appear acceptable, but a closer examination of the data showed the public were harder hit than was reflected in the official figures.

He cited CPI (A) - which reflects the living costs for households spending some HK$4,300 to HK$16,900 a month.

This showed that prices went up by 3.1 per cent year on year last month.

Data from the Census and Statistics Department showed food costs rose 3.4 per cent.

Lee Kwong-lam, a major food importer and honorary president of the Hong Kong and Kowloon Vermicelli and Noodle Manufacturing Industry Merchants' General Association, said food prices were likely to continue rising with the appreciation of the yuan.

Hong Kong imports most of its food from the mainland, where food prices soared 10.1 per cent in October.

'I would not be surprised if food costs go up by another 5 to 10 per cent in the coming months,' Lee said.

'Prices of imported vegetables, meat, and even canned foods are all rising.

'There is little we can do but increase our prices accordingly.'

Meanwhile, officials blamed cost increases partly on Washington's planned second round of quantitative easing.

'Inflation in Hong Kong is likely to go up further in the near term,' said a government spokesman, adding it was partly due to the 'regional wide increase in inflation in Asia'.

'The new round of quantitative easing [QE2] in the [United States] will also pose upside risks to inflation,' he said.

The government revised upward its 2010 inflation outlook to 2.5 per cent, from the August forecast of 2.3 per cent. The economy grew by 6.8 per cent in the third quarter.

One-off government measures, such as electricity subsidies, might have distorted the inflation figures.