Prices fell in Hong Kong last month for the 37th consecutive month, as the composite consumer price index dipped slightly below expectations to a 1.4 per cent year-on-year decline. A Reuters poll found economists had on average expected last month to decline by 1.2 per cent, the same as the year-on-year decline in October. However, Standard Chartered chief economist for North-East Asia Kwok Kwok-chuen said the figure was not a surprise. 'I don't think it will get much worse. This is just a drag-down situation. It is partly because of the global situation and partly because of the local situation, but I don't see any major changes in the near future,' Mr Kwok said. He said the figure was not all bad news, as deflation had increased Hong Kong's long-term competitiveness. 'In the short term, it means pressure from a variety of people and companies, but in the long term, given our fixed exchange rate . . . a gradual decline in prices will make our economy more vigorous in the future,' Mr Kwok said. Morgan Stanley economist Denise Yam Wing-yan said the firm expected deflation to have eased by now, notwithstanding the high base of comparison from last year. 'This deflation figure is not good news,' Ms Yam said. 'It seems like the recession is taking a toll on prices again.' Ms Yam said prices were falling because of weaker currencies around the region against the United States dollar. Hong Kong's strong currency, which is pegged to the US dollar, has contributed to the fall in import prices, such as food and other goods. The global downturn had also caused international commodity prices to fall, especially for oil, in recent months. Further integration with China had increased pressure on prices and business profitability, she said. 'Probably the rate of decline will be about the same or worse for a little bit longer. The weakness in prices will probably persist into the first quarter of next year,' she said. Ms Yam was unwilling to draw too many conclusions from one month's figures. However, a 3 per cent decline in clothing and footwear prices for last month was significant as it had slightly eased compared with October. 'It is not a big component [it comprises 4 per cent of the index] but it reacts the fastest to consumer demand,' Ms Yam said. Morgan Stanley forecast the US economic recovery would become apparent in the middle of next year. Food, which makes up 27 per cent of the index, declined 1.2 per cent last month, with prices for food bought for consumption at home slipping by 2.5 per cent. Durable goods registered the largest year-on-year decline at 7.3 per cent, continuing a pattern this year where the usually big-ticket items have fallen by about 7 per cent each month year on year.