Prices fell again in August as Hong Kong's deflationary run stretched to 46 consecutive months. Deflation eased marginally to 3.3 per cent year on year from 3.4 per cent in July, taking deflation for the year to 3 per cent. Housing costs, which dominate the composite consumer price index, fell 6.4 per cent compared with the same month last year, with public housing rents tumbling 10.4 per cent and private housing rents falling 6.6 per cent. 'Rental prices have been on a downward trend throughout the year,' said George Leung Siu-kay, HSBC chief economist for Greater China. 'Stabilising property policy is necessary in my view. 'I'm not asking the government to support the property market, but you've got to tell the market what your housing policy is, because the market doesn't like uncertainty.' Mr Leung said there had been some improvement in import prices in August - apart from food which was mostly imported from China - but it had not been enough to influence deflation. 'I don't think Hong Kong retailers can pass on price rises, even with oil,' he said. ABN Amro group chief economist Eddie Wong said government concessions announced in the March budget, such as rates waivers, had dragged deflation for the year down an average 1.2 per cent. Hang Seng Bank chief economist Vincent Kwan said when there were economic uncertainties people would demand rent reductions. 'I think the present deflationary system has been mainly due to weak domestic demand and falling income which puts pressure on spending,' Mr Kwan said. Morgan Stanley economist Denise Yam said the negative deflation outlook for the medium term had again focused attention on the currency's US dollar peg. 'We maintain our view that the government is unlikely to end the peg under market pressure, although we believe that more innovation and flexibility in economic policy could be constructive to Hong Kong's long-term development,' Ms Yam said.