Bloomberg News

Hong Kong’s Inflation Rises a More-Than-Expected 5.8% on Rents

November 23, 2011

Nov. 23 (Bloomberg) -- Hong Kong’s inflation was more than economists expected in October because of elevated rental costs.

Consumer prices rose 5.8 percent from a year earlier, the same gain as in September, the government said on its website yesterday. That compares with the median 5.7 percent forecast in a Bloomberg News survey of eight economists.

Financial Secretary John Tsang said Nov. 21 he expects inflation will peak this quarter on moderating gains in food prices, and weaker demand from Europe and the U.S. will be a drag on exports and economic growth. Earlier surges in private housing rentals will push living costs upward in the “near term,” the government said in the release yesterday.

“The downside risks to growth would gradually overtake upside risks to inflation, as we go into 2012,” Kevin Lai, a Hong Kong-based economist at Daiwa Capital Markets, said before the report. “In rental markets, we are prepared to see deflation forces to strike” as demand slows, he said.

Excluding the impact of temporary government subsidies, the underlying rate was 6.4 percent last month, same as the gain in the previous month. The government cut this month its 2011 inflation forecast to 5.2 percent from the estimate in August of 5.4 percent.

Housing rents are still at an “elevated” level as the average prices in August through October rose 11 percent from a year earlier to HK$20.50 ($2.63) per square foot, Centaline Property Agency, the city’s biggest closely held property broker, said Nov. 21, citing a survey of 85 major residential estates.

China’s inflation slowed to a 5.5 percent annual pace last month after the United Nations Food and Agriculture Organization said global food prices slid 4 percent from the previous month.

Hong Kong’s inflation will ease to a range of 4 percent to 5 percent in 2012, down from 5.5 percent this year, the International Monetary Fund said last week.

--With assistance from Ailing Tan in Singapore and Billy Chan in Hong Kong. Editors: Lily Nonomiya, Joshua Fellman

To contact the reporter on this story: Sophie Leung in Hong Kong at sleung59@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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