Inflation in Hong Kong has been rising for two consecutive months. The Census and Statistics Department announced yesterday that the overall consumer price (CPI) in July rose by 1.9% year-on-year, slightly higher than the 1.8% in June. Excluding the impact of all the government’s one-off relief measures, the July Underlying inflation was also at 1.9%, also slightly higher than June’s 1.8%. Inflation intensified, mainly due to larger increases in the prices of food, energy and clothing and footwear. Economists expect that global energy prices will continue to rise, and local inflation may rise above 2% in the next few months. In the absence of a significant economic recovery, Hong Kong people’s consumer confidence will be affected.
Government points to continued mildness in the short term
The seasonally adjusted Composite CPI rose an average of 0.2% per month in the three months ended July this year, while the corresponding increase in the three months ended June was 0.1%; excluding all government one-offs For the impact of the relief measures, the corresponding increase was 0.1%. In the first seven months of this year, the Composite CPI rose by 1.6% year-on-year, excluding the effects of all government one-off relief measures, the corresponding increase was 1.7%.
Among major consumption categories, food prices rose by 4.1% year-on-year in July, with basic food up 5% and dining out and takeaways up 3.5%. During the period, the prices of electricity, gas and water soared by 15.1% year-on-year, which was the category with the highest price increase in the month, 1 percentage point more than the 14.1% increase in June, and maintained a double-digit increase for two consecutive months. In addition, the price of clothing and shoes rose by 6.5%, which was also 1 percentage point higher than that in June.
Housing continued to be one of the few categories that maintained a decline in prices. In July, housing prices fell 0.4% year-on-year. Among them, private housing rents fell by 0.7% and public housing rents fell by 0.1%. In addition, the price of information and communication services fell 2.2% year-on-year.
Underlying consumer price inflation remained generally moderate in July, although it edged up further to 1.9%, a government spokesman said. Prices of food, energy-related items and clothing and footwear continued to record significant year-on-year increases, while price pressures on other major components remained largely under control.
The spokesman continued that external price pressures are expected to remain significant for some time due to high inflation in some major import sources. However, local cost pressures should remain subdued and overall inflation should remain subdued in the near term.
Scholars worry regarding climbing to 4% next year
Wu Zhuoyin, senior economist for the Asia-Pacific region of Natixis, believes that the rise in electricity and food prices is accelerating. For example, excluding housing rents, prices will rise by 4%. It is believed that local inflation will rise to more than 2% in the short term. He pointed out that if people’s income and wealth have increased steadily, an inflation increase of regarding 2% is not a big problem, but Hong Kong’s economy is still under the control of the epidemic, and the disposable income of Hong Kong people has declined slightly compared with the same period last year. The pressure is high.
Wu Zhuoyin pointed out that with rising inflation, consumer sentiment will definitely be hit. Even if the government distributes consumer coupons in the second half of the year, citizens will be more inclined to use them for daily necessities and durable goods, and their own consumer confidence has not yet recovered. The pull effect is difficult to compare with last year.
Mak Cui Cai, an associate professor at the Department of Finance and Decision Making of Baptist University, said that inflation of 1.9% is still moderate, even though energy prices have risen significantly; entering winter, energy prices are likely to rise once more, but electricity bills will not account for much of the personal expenses of citizens high, without deviating from affordability.
He explained that the overall price of Hong Kong is more affected by the price of food and rent. The latter is still under pressure with the price of the property. However, food is mainly supplied by the mainland and is still abundant for the time being. Hong Kong’s interest rate hike in the United States, the depreciation of the RMB and the weak demand are all factors. Inflation can be kept moderate.
However, Mai Cui Cai reminded that the extreme weather in some parts of the mainland may affect crop harvests, and energy prices may rise significantly at the end of the year. It is not ruled out that inflation may rise to 3% to 4% next year.
