Hong Kong may have escaped the worst of the Covid-19 pandemic but not the global economic fallout. The sustained recovery revealed in the latest economic statistics masked an uneven distribution of benefits among residents due to the effects of the coronavirus. In particular, wages failed to keep up with consumer price inflation for basic necessities such as fresh produce. The city’s recent economic recovery gained traction in the third quarter, with 5.4 per cent growth over the same period last year, according to the Census and Statistics Department. This was on the back of robust export growth and buoyant private consumption related to the government’s e-voucher scheme . However, thanks in part to the disruption of global supply chains, the city faces growing pressure from inflation as a result of high overseas energy and commodity prices, and shipping costs. This mirrors the experience on the mainland, the primary source of Hong Kong’s fresh food supplies, where the effects of severe flooding and power cuts have added to inflationary pressures. Government monitoring of the price of basic necessities on the mainland, such as vegetables and meat, showed that the cost of almost everything went up towards the end of last month. As a result market price stability has become a top priority. Vegetables costing more than meat in China as power crisis, virus hit pockets In Hong Kong, price pressure on wages has tempered an upbeat growth forecast by Financial Secretary Paul Chan Mo-po. Predicting 6.5 per cent growth this year, the fastest expansion since recovery from the global financial crisis in 2010, Chan noted that while wages rose by 1.1 per cent year on year in June, they fell by 0.3 per cent after deducting changes in consumer prices. The effect of the pandemic on business activity and border closures with the mainland would have done nothing for demand for labour and therefore wages. Rightly, Chan vowed the government would strive to ensure that more people saw a real improvement in their lives. The resurgence of inflation reflects the global disruption of supply chains, loss of transport links and border closures. Even as many countries have begun living with the virus without restrictions, it is still difficult to see any quick return to normal. A return to healthy growth is welcome. But wages that are effectively falling as the costs of basic necessities rise hit the most vulnerable. Hopefully Chan’s comments mean the government is at least well aware of the hardship for people on lower incomes and the need to address it. Meanwhile, central banks have to strike a delicate balance between any monetary tightening in the face of inflation and safeguarding the recovery they have strived to engineer. That depends on whether we have reached the high point in the current cycle.