Hong Kong: Inflation climbs to highest level in over two years
August 20, 2013
Annual inflation increased sharply to 6.9% in July, up from 4.1% in June. The reading represents the highest level since July 2011 and exceeded market expectations of a 5.0% increase. According to the Census and Statistics Department, the sharp rise was mainly due to the low base of comparison, which resulted from the government's one-off payment of public housing rentals in July of last year. As a result of the acceleration, annual average inflation rose to 4.1% (June: 3.6% year-on-year).
A government spokesman stated that inflation, "is still subject to modest upside risks in the coming months," mainly due to the lagging effects of the rise in private housing rentals during 2012. However, the spokesman added that, in the second half of this year, inflationary pressures should remain contained amid subdued imported inflation and the recent mild increase in housing rentals.
The government revised its inflation projection for this year and now expects inflation to average 4.3% (previous estimate: 4.5%). FocusEconomics Consensus Forecast panellists expect inflation to average 4.0% in 2013, which is unchanged from last month's forecast. For 2014, the panel expects annual average inflation to moderate to 3.7%.
Author: Ricardo Aceves, Senior Economist