LI, Tao @ Hong Kong

CPI increases to 3.7% YoY in Feb from 3.6% in Jan

Rising food and rent prices in Hong Kong led the city’s consumer prices to climb at the fastest pace in 30 months with the inflation rate accelerating to 3.7 percent in February from 3.6 percent in January.

The underlying inflation rate, which nets out the effects of the government’s one-off measures including electricity subsidies, waivers of property rates and public housing rents, climbed to 3.6 percent during the month. This was higher than the 3.5 percent rise in January, figures released by the Census and Statistics Department on Tuesday showed.

The February CPI data was above the median 3.2 percent rise forecast by seven economists surveyed by Dow Jones Newswires and the 3.6 percent median estimate of 13 economists surveyed by Bloomberg.

Irina Fan, senior economist at Hang Seng Bank said that as the comparison base during the same period last year was high due to the lunar new year, economists had believed that the February figures would have seen deceleration rather than acceleration.

She said unlike in 2010 when the Chinese New Year was in mid-February, the festival this year took place in early February – which should have a bigger impact on January data rather than February.

“The latest figure shows that the city’s inflation these days is indeed high,” said Fan.

Food prices increased 5 percent last month while housing prices rose 3.9 percent compared with the same period in 2010, in comparison with readings of 5.3 percent and 3 percent in January.

Taking the first two months of 2011 together, consumer prices have risen by 3.7 percent compared with a year earlier.

A government spokesman said that combining January and February removes any potential distortion due to the timing of the lunar new year.

The spokesman added that inflationary pressure in the economy is likely to increase in the coming months, as global food and commodity prices remain expensive and the feed-through from the earlier rapid increase in private housing rents continues.

Inflation is also being “fuelled by a spillover impact from rising food prices” on the mainland, HSBC economist Donna Kwok told Bloomberg. Food prices on the mainland soared 11 percent last month, boosting prices in the city which sources much of its fresh food from mainland.

Hang Seng Bank’s Fan added that food prices are climbing globally. In particular, the effects of the recent earthquake in Japan will also cause imported food prices to surge in the next few months.

Last month, Financial Secretary John Tsang said the government expects the city’s consumer prices to rise 4.5 percent this year, more than the 2.4 percent increase in 2010 due to higher rents and import prices.

Tsang also brought down a third consecutive budget heavily laden with so-called sweeteners to help citizens combat inflation, including short-term measures such as electricity subsidies of up to HK$1,800 and waivers on government rates of up to HK$1,500 every quarter for 82 percent of private property owners in Hong Kong.

China Daily

(HK Edition 03/23/2011 page3)

http://www.chinadaily.com.cn/hkedition/2011-03/23/content_12211765.htm