How Hong Kong inflation data obscures the insight needed to help poorer families
- While not inaccurate, the official figures have little meaning when it comes to assessing poorer households’ suffering or shaping public policy
- An inability to target government support will result in families not getting the help they need and taxpayers’ money being wasted
Heads of broccoli are also more expensive – usually three for HK$14 but last weekend up to HK$20 for a single head. Our cooking oil has jumped from HK$72 for five litres to HK$115, and our normal pack of salt has jumped to HK$4.90 after selling last month at HK$2.90.
It seems inflation has returned. As with the rest of the world, there are arguments about whether it is likely to be temporary or sustained.
And yet, if you ask our Census and Statistics Department, Hong Kong’s consumer price index (CPI) is up by just 2.4 per cent and by only 1.4 per cent when factoring out the government’s one-off relief measures in the past year. That all seems modest compared with the surge in the United States to 7.5 per cent in January and to 5.4 per cent in Britain.
It’s not that the Census and Statistics Department is lying. Rather, the problem is that the data does not provide the insights we need.
Tim Harford wrote in last week’s Financial Times that in Britain, the Office for National Statistics collects 6,000 price quotations every day across the UK to compile its consumer price index. I am sure our Census and Statistics Department staff here are similarly conscientious.
“Is this statistical firepower well-aimed?” Harford asks. “Yes, if the aim is to measure inflation across the economy. But no if we want to understand what is happening to the poorest households.” He notes that the average colour of a rainbow is white, but this average provides no glimpse into what a rainbow actually looks like.
Devising an index that focuses on the spending needs of the poor might be a good idea. Work on this by Chris Giles of the Financial Times suggests “inflation is much the same for everyone”.
Hong Kong consumers feel inflation pinch, but is there light at end of tunnel?
Our statisticians are unable to take meaningful account of how humans behave in the face of hardship and how families tweak their shopping habits when budgets are under stress. Faced with a tight budget, a family is first going to list the essentials.
There are then some essentials you don’t need to buy tomorrow. For some essentials, an immediate option is to trade down on brands. That is why supermarkets have their in-house brands.
A savvy shopper on a tight budget will also head for the “reduced to clear” shelves or take advantage of special offers. My wife meticulously combs the Wellcome and ParknShop websites to compare prices and catch good offers.
Needless to say, no statistician working on the CPI has the capacity to take any reliable account of price volatility. On the contrary, their job is to ignore such oscillations.
Their task is to track the same goods, month after month, even though this is next to useless for a hard-pressed household shopper or a financial secretary preparing a budget in which he knows he has to prioritise government support to those most in need.
Most statisticians will provide data that shows “white rainbows” all over the place, but what we need is data that can pick out the colours. Without that, our poorest families will not get the help they need and our government will be wasting our money.
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view