Inflation rate accelerates to 3.6% in January

Consumer prices in January rose at the fastest rate in 29 months, with the inflation rate accelerating to 3.6 percent from 3.1 percent in December, mainly reflecting higher food prices and increases in private housing rents, the government said Tuesday.

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 rentals, climbed to 3.5 percent during the month from 2.8 percent in December, figures released by the Census and Statistics Department show.

Food prices increased 5.3 percent last month while housing prices rose 3 percent compared with the same period in 2010. Both expanded faster than the readings of 4.3 percent and 2.5 percent in December.

A government spokesman said the food price hikes and the continuing effects of an increase in private housing rents were the main causes of accelerating inflation last year.

He noted that the timing of the lunar new year, which fell in early February this year, could have led to faster price increases in the latter part of January.

The Chinese traditional festival, however, was in mid-February 2010, which should have had less of an impact on January inflation data compared with this year.

Electricity, gas and water prices surged 7 percent in January, as more households had already used up the subsidy from the government as a hardship measure in the wake of the 2008 financial crisis.

Hong Kong's budget, delivered today by Financial Secretary John Tsang is likely to continue offering one-off handouts, including a HK$3,600 subsidy on household electricity bills, to help residents cope with the sting of rapidly rising prices, according to local media reports.

Further measures to cool the booming property market are also expected. The city's private rents have risen 11.5 percent in the past year, a Midland Realty report published on Tuesday said.

Leases with monthly rents below HK$10,000 still accounted for about 44 percent of the city's total in January 2010. But that proportion has fallen to 33 percent in January of this year, down 11 percentage points from the same period in the previous year, according to the same report.

The government spokesperson added that Hong Kong's economy is likely to face higher price pressures in the coming months, due to sustained growth in global food and commodity prices, high inflation rates among trading partners as well as strong local economic conditions.

"The continually improved employment condition will also stimulate consumption in the city, which further pushed up inflation in Hong Kong in the year," said Paul Tang, chief economist at the Bank of East Asia.

Hong Kong's jobless rate fell to 3.8 percent for the three months ended Jan 31, the Census and Statistics Department said on Monday. It is the lowest level in more than two years.

Tang estimates the city's unemployment rate will float below 3.5 percent while the consumer price index - the key gauge of inflation - will hover around 4 percent in 2011.

China Daily

(HK Edition 02/23/2011 page2)