The Anti Neo-Democracy Theorist

Source: Home and Villas

Does Hong Kong need high ministerial salaries, higher GST, restriction of freedoms such as the freedom of press, freedom of assembly, freedom of speech, freedom of unionization for its economy to hum along? Does Hong Kong have a stricter Societies Act, Internal Security Act, Newspaper and Printing Act than Singapore?

More on Hong Kong versus Singapore in a later post…stay tuned….

The Business Times Singapore

March 23, 2007 Friday
HK inflation in Feb tops 2-year high at 3.1%;
But one-off waiver of public housing rental brings rate down to 0.8%
Jane Moir In Hong Kong

INFLATION in Hong Kong soared to a more than two-year high in February from a year earlier, with consumers hardest hit when buying food, clothing and dining out.

The composite consumer price index (CPI) rose by 3.1 per cent last month when discounting a one-off waiver of public housing rental that distorted the monthly figure.

This exceptional rent freeze brought the inflation rate down to 0.8 per cent.

The year-on-year figure for January was 2 per cent. Inflation has hovered around this level for the past 12 months, shooting up briefly to 2.5 per cent in August.

Economists looking at the underlying February figure of 3.1 per cent believe it is part of a general upward trend - inflation gradually creeping up in the city as a healthy economy, low unemployment and growing wages buoy consumer confidence and retailers enjoy brisk sales.

The Chinese New Year holidays also fell in February this year, jacking up prices of package tours and food as Hong Kong retailers opened their doors to a steady stream of mainland tourists.

Cash registers are constantly ringing to the tune of healthy sales. In December 2006, the total value of retail sales rose by 8.5 per cent over the same period a year earlier.

For 2006 as a whole, total retail sales increased by 7.3 per cent in value or 5.8 per cent in volume over 2005.

People are also more confident about their spending. According to a MasterCard survey in January, consumers in Hong Kong are the second most optimistic in the region.

Prices of clothing and footwear saw the biggest rise in February, jumping 7.8 per cent compared with a year earlier. The price of food went up by 5.3 per cent, while eating out cost 2.1 per cent more than it did 12 months ago.

Retailers are also being tempted to pass on rising overheads to consumers. Colliers International estimates that retail rents will increase by between 10 and 15 per cent in 2007.

Related articles: Click here to read the full text of Mr Hawazi Daipi’s speech View the Manpower Ministry’s ProBE 2007 factsheet

The inflation rise comes against a backdrop of the recent Budget which offered a number of sweeteners to households, including tax giveaways and a rates freeze.

This is likely to distort inflation further, Bank of East Asia chief economist Paul Tang Sai-on notes.

‘Underlying inflation pressure will still be up,’ he stressed however. ‘Clearly, people’s spending power is much better, so there should be room for retailers to raise prices.’

Mr Tang expects inflation to be in the region of 3 per cent looking ahead to 2008.

It is expected that the February figure of 3.1 per cent will come down in March after taking account of the Chinese New Year celebrations.

The government admitted yesterday that the budgetary factors - such as the two-month rates waiver - will continue to be a distorting factor in the headline consumer price index figure during 2007.

According to a spokesman, inflationary pressures should be curtailed by labour productivity growth, offsetting an anticipated pick-up in imported inflation due to the weak US dollar and renminbi appreciation.

Hong Kong has been enjoying robust economic growth for the last three years, with gross domestic product in the last quarter hitting 7 per cent. Unemployment, in the meantime, remains low with the jobless rate currently at just 4.3 per cent.