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Rents, food drive inflation to 6.3pc

South China Morning Post – 23 Sept. 2011

Consumer prices in Hong Kong surged 6.3 per cent in real terms in August, up from the 5.8 per cent recorded in July.

The nominal inflation rate was 5.7 per cent, seemingly lower than the previous month’s 7.9 per cent. But minus the effects of the government’s one-off relief measures, the real rate of increase in the underlying inflation rate in August was 6.3 per cent, showing that inflationary pressure remained strong.

An economist yesterday warned that higher rents and food prices would continue to drive up inflation, but he believed that the US government’s latest credit easing measures, announced on Wednesday, and soaring prices for rice imported from Thailand, would have little impact.

A government spokesman attributed the rapid increase in the inflation rate to last year’s lower base of comparison, when the government temporarily waived public housing rentals in a one-off relief measure.

“Private housing rentals and food prices remained the two major contributory factors,” the spokesman said.

The latest inflation rate announcement came after the introduction of “Operation Twist”, the US Federal Reserve’s latest recession-fighting strategy, and possible soaring rice prices amid the Thai government’s plans to buy rice from the country’s farmers at above-market prices.

Raymond So Wai-man, the dean of the business school at the Hang Seng Management College, believed these two factors would have little impact on Hong Kong.

“Operation Twist will not affect mortgage interest rates, so that will not have much effect on our inflation rate,” So said.

“And in terms of rice prices from Thailand, Hong Kong can import rice from other places like Vietnam and mainland China. Moreover, rice is only one of the many food items bought in this city. Its influence on inflation is very minimal.”

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