The economy has slid into deflation for the first time in 23 years. Last month, the consumer price index fell 0.7 per cent from a year earlier. The year-on-year decline, which came earlier than anticipated, raised fears economic recovery was some way off. Economists said the fall in prices was bigger than expected and the situation would remain for some time. In October, the price index rose 0.1 per cent. The economic downturn, the freezing of some government fees and charges, and the continued impact of a one-off rate rebate for property owners that came into effect this quarter had contributed to the fall, a government spokesman said. Added to this was the fact that falling world commodity prices and low inflation around the region had kept the price of imports down. The Government said the fall helped contain the cost of living. Reduced costs would also help businesses. However, economists said the overall impact was less palatable. Regional economist at Morgan Stanley Dean Witter, Andy Xie Guoshong, said negative inflation meant real interest rates stayed high, which would seriously dent corporate earnings. Pressure remained on the Government to ease the burden on consumers and stimulate confidence, said Mr Xie. Financial Secretary Donald Tsang Yam-kuen has already indicated that tax cuts and increased welfare spending are out of the question, leaving only infrastructure spending as a way of stimulating the economy. Mr Xie said that while the Government was committed to large-scale spending throughout next year, it had only limited ability to expand the programme, particularly with a burgeoning budget deficit, widely tipped to be about $50 billion. Non-food sectors again suffered the biggest year-on-year declines. Prices of clothing and footwear shrank by 10.2 per cent. Food, excluding meals bought away from home, declined by 0.4 per cent in November over a year before, while housing fell 2.2 per cent and durable goods were down 0.4 per cent. Chief economist at Clarion Securities, Enzio von Pfeil, said the declines in non-food items reflected 'income security' rather than job insecurity. 'People who have jobs are saying, 'I'd better not spend because I don't know when I'll lose my job'.' The Composite Consumer Price Index decreased by 0.6 per cent between October and November, while it rose 3.2 per cent since the beginning of the year, compared with the same period in 1997.