Hong Kong: Consumer prices decline annually for first time in nearly eight years in February
March 21, 2017
Consumer prices tumbled in February, declining for the first time in nearly eight years. After inflation of 1.3% in January, consumer prices declined 0.1% over the same month last year in February—the first decline since August 2009—on the back of falling prices for electricity, gas and water, along with lower food prices. While prices for durable goods and clothing also fell moderately, overall housing prices rose marginally as did prices for transport and alcoholic drinks and tobacco. The timing of the Lunar New Year holiday was a factor in the decrease in prices in February, as the holiday fell in late January and early February this year while it fell entirely in February last year. This timing meant that charges for package tours were split between January and February this year and decreased overall spending in the latter month, according to the Census and Statistics Department.
A government spokesperson suggested that, looking ahead, “inflation pressure should remain contained in the near term, given the low imported inflation and moderate increases in local costs.” Ongoing normalization of U.S. interest rates will add further downward pressure to consumer prices, particularly housing and rents, as an expected capital flight corrects Hong Kong’s residential property prices.
For the three-month period from December to February, the average of the month-on-month variations in consumer prices came in at minus 0.1% in seasonally-adjusted terms, contrasting the 0.1% average rise seen in the three months up to January. Meanwhile, annual average inflation was 2.0% in February, coming in below January’s 2.3% reading.
Author: Christopher Thomas, Economist