The drop in Hong Kong's consumer prices lessened last month in the wake of moderated falls in private housing rentals, prompting mixed views about the outcome for the end of the year. September's year-on-year composite consumer price index (CPI) fell 2.6 per cent compared with a year ago, slightly less than August's 2.7 per cent decline. In August last year, the composite CPI fell 6.1 per cent as Hong Kong consumers came to grips with the tail-end of the Asian financial crisis. It last fell at a year-on-year rate of 2.6 per cent in March last year - 19 months ago. Economists last month said they expected a 1 per cent to 2 per cent deflationary environment at the end of the year. Much depends on the recovery of rental prices in the lower-end housing sector. 'If you look at the trend, the office rentals and the high-end property rentals have already gone up,' Dao Heng Bank senior economist Daniel Chan said. 'Unfortunately for the lower-end properties, the rental continues to be flat,' he said. 'I think in coming months, deflation will continue to persist.' Chase Manhattan senior economist Daryl Ho Hon-kit is optimistic on monthly improvements, saying an expected drop in unemployment figures should see a flat absolute month-on-month CPI figure by the year-end - possibly between a positive 0.08 per cent to 0.1 per cent. Mr Ho said housing rentals showed initial signs of picking up and there had also been pressure on utility firms to raise fees and charges and this would be reflected in future CPI figures. 'There is good reason to believe that the general price level should be flat or picking up in the remainder of this year,' Mr Ho said. Mr Chan, however, said a downturn in the equities market could pressure residents, crimping their spending power. 'We don't expect there will be a significant improvement as consumer spending continues to be slack because of the still high interest rate and the equity market slump,' Mr Chan said. Comparing the year-on-year decreases in September with those in August this year, the prices of fresh vegetables registered a much more significant fall over a year earlier due to the higher base of comparison in September last year. Among other components, clothing and footwear continued to register the largest year-on-year decrease (-7.2 per cent), followed by food (-6.3 per cent, excluding meals bought away from home), housing (-5.6 per cent) and durable goods (-0.5 per cent). Increases were recorded for fuel and light (up 3.5 per cent) and miscellaneous goods (up 2.5 per cent). For the 12 months ended September, the composite CPI was on average 4.1 per cent lower than in the preceding 12-month period. A government spokesman said although world commodity prices had firmed in recent months, the subsequent impact on local consumer prices had been 'rather limited' so far.