Utility bills have shrunk, thanks to the government's subsidies on electricity charges, while alcohol and tobacco are getting more expensive, according to official statistics.
Consumer prices dropped 0.9 per cent last month compared with a year ago, the first year-on-year decline since January 2005, the Census and Statistics Department said yesterday. Netting out the effects of one-off government relief measures, last month's Consumer Price Index rose 0.4 per cent - compared with 1.3 per cent in May.
Economists say Hong Kong has entered a deflationary cycle, noting that its headline inflation rate - which includes the effects of the relief measures - fell last month for the first time in four years.
But the price decreases would be mild or near zero, at least until the end of this year, before the world economy recovered, they said.
A government spokesman said: 'Consumer prices ... remained on an easing trend, as local wages and rentals continued to adjust to the economic downturn.'
Among the various components of the CPI, the cost of electricity, gas and water recorded the greatest year-on-year decline, of 42.5 per cent, because of the electricity subsidies. Durable goods fell 3.6 per cent.
Alcohol and tobacco prices increased most, by 22.5 per cent, followed by rents, by 3.7 per cent.
