Let's take a little time to clear up some common confusion about the terms we use to describe periods of rising or falling prices on the consumer price index.
Periods of generally rising prices we refer to as inflation. Periods of generally falling prices we refer to as disinflation. Simple, easy and you will now undoubtedly pose the obvious question. What in that case is deflation?
Exactly. Deflation is a somewhat different phenomenon. You can describe it as periods when the puff goes out of an economy and it deflates as a balloon deflates if you let the air out. Economists refer to it as lack of demand.
Deflation, particularly when prolonged, tends to bring disinflation in its wake. When people do not want to buy, usually when their financial system is in a complete mess, you tend also to get falling prices, commonly accompanied by a pronounced slowdown in the growth of the money supply. But the fact that the two can happen at the same time does not say they are the same.
It is an important distinction to make at the moment because many people speak of Hong Kong as suffering deflation and the word necessarily carries a good deal of emotive baggage about hard times.
Disinflation, yes; our consumer price index registers falling prices. But deflation is too strong a word to use when our overall economic growth rate barely nudged into negative numbers in the third quarter and personal consumption expenditure still showed growth.