September 22, 2014

Annual inflation inched down from 4.0% in July to 3.9% in August. The print slightly undershot the 4.0% market analysts had expected. According to the Census and Statistics Department, the result was mainly driven by higher price increases in the electricity, gas and water category given that, “some households had used up the full amount of Government's one-off electricity charge subsidy.”



In August, consumer prices declined 0.4% over the previous month in seasonally-adjusted terms, which contrasted the 0.4% increase recorded in the previous month and marked the sharpest decline in 11 months. Despite the slower year-on-year increase, annual average inflation was steady at the previous month’s 4.1% in August.



A government spokesman stated that, “inflationary pressures stayed on an easing trend,” mainly due to, “the receding rental cost pressures and the modest rise in import prices.” In addition, the spokesman noted that, “looking ahead, the relatively mild imported inflation alongside the generally moderate local price pressures should help keep underlying inflation contained in the rest of the year. Nevertheless, headline inflation will likely pick up temporarily in September 2014 on a year-on-year comparison, as the Government's payment of public housing rentals in September last year created a low base of comparison.”

The government expects inflation to reach 4.4% in 2014. FocusEconomics Consensus Forecast panelists expect inflation to average 3.8% in 2014, which is down 0.1 percentage points from last month’s forecast. For 2015, the panel expects annual average inflation to moderate to 3.4%.