Hong Kong: Inflation jumps in July on housing waiver distortion
August 22, 2011
In July, consumer prices fell 0.1% over the previous month, contrasting the 0.5% rise recorded in June. The drop was driven by lower prices for electricity, gas and water, as a result of the government's electricity charge subsidy, which offset higher prices for food and housing. In spite of the monthly price drop, annual inflation jumped from 5.6% in June to 7.9% in July, mainly due to the low base of comparison resulting from the government's payment of public housing rentals in July last year. The reading undershot market analyst expectations of an 8.2% rate and marked the fastest pace since December 1995. Annual average inflation rose from 3.3% in June to 3.9%. A government spokesman confirmed that consumer prices will be subject to upward pressures in the coming months, due to both external and domestic factors including high global food and commodity prices. However, in its last economic outlook from 12 August, the government left the inflation forecast for this year unchanged at 5.4%.