Special interviews
Written by: Liang Cuili
2021-07-03 10:15
The last update date: 2021-07-03 10:15
Global inflation is heating up, but Hong Kong's data continues to be low. Even though food prices soared last year, Hong Kong experienced deflation.
Is it because the Hong Kong Government’s statistical methods fail to fully reflect the facts, or are the data lagging behind?
"Hong Kong 01" interviewed a number of scholars and economists to dissect the "inside situation" behind the data and predict the future trend of Hong Kong's inflation.
Global food prices are rising. The Food and Agriculture Organization of the United Nations reported that although world cereal production is expected to hit a record high, global food prices rose at an alarming rate in May, rising 4.8% quarterly and nearly 40% year-on-year, for more than ten years The fastest growth rate; meat prices have risen for the eighth consecutive month, increasing by more than 10% year-on-year.
The market is attributed to "China's soaring demand for grain and soybeans", "Brazil has suffered from a severe drought", etc. However, no matter what the reason is, the increase in food prices and transportation costs is an indisputable fact.
Among them, U.S. inflation data exceeded market expectations. In May, the consumer price index increased by 5% year-on-year; India lost its onion harvest last year and its output was cut by half. Indians almost all added onions to their staple food, resulting in a sharp rise in prices and an inflation rate of about 2 %, rising to 6.3% in May; even in China, the price of beneficiary pork fell from a high level by nearly 24%, and the CPI in May also increased by 1.3% year-on-year.
People's livelihood products such as beef, fresh seafood and fresh fruits increased by 10.4%, 9% and 9.1% year-on-year respectively.
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Hong Kong's inflation rate continues to be "downturn"
As for Hong Kong's inflation data, it seems that it has not been affected by the current price increase. The Composite Consumer Price Index rose by 1% in May, and the food category (including food ingredients and dining out) rose by 1% year-on-year, excluding the impact of the government’s one-off relief measures , The underlying inflation rate only rose by 0.2% year-on-year.
The increase in overall inflation is not obvious, but if you look closely at some consumer goods, the situation is surprising.
For example, beef, fresh seafood and fresh fruits increased by 10.4%, 9% and 9.1% year-on-year respectively.
Looking at the Consumer Council’s annual supermarket price survey, Hong Kong’s food prices have actually been "following the market." Last year, canned food increased by 19.9%, of which canned meat rose by more than 25%, which was much higher than the prices of other goods and overall inflation. Rice prices have climbed for three consecutive years.
Xue Junsheng, chief economist at Hang Seng Bank, estimates that inflation was 2% in the third quarter of this year, 1.7% in the fourth quarter, and an annual average of 1.5%.
(Provided by interviewee)
When this gap appeared, Xue Junsheng, chief economist of Hang Seng Bank, explained in an interview with "Hong Kong 01" that the general public has a deep feeling about the increase in food prices. However, despite the impact of the epidemic, although food prices have increased, looking at it as a whole, others are related to inflation. The price increase in China is not very large. For example, housing rents have fallen by 6% year-on-year, which offsets each other and makes the level of inflation insignificant.
Looking at the statistics of the Census and Statistics Department, nearly 28% of the components of the Hong Kong Consumer Price Index come from food and 35% from housing, including rent (including rates and ground rent), management fees, miscellaneous fees and maintenance expenses, and the rest are electricity. , Clothing and footwear, transportation, etc. Different from the index composition of the Mainland, China is mainly composed of food and non-food products, such as pork, freshwater fish, transportation and communications, gasoline, air tickets, etc., and housing prices do not account for much.
35% of the components of the Hong Kong consumer price index come from housing, including rent, management fees, miscellaneous expenses and maintenance expenses.
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The share of housing in May fell year-on-year
In the category index of the Composite Consumer Price Index in May, housing fell 0.7% year-on-year.
The analysis pointed out that under the epidemic, various countries have closed customs to reduce population movements. This group of "potential tenants" from the Mainland and foreign countries has not been able to come to Hong Kong. The supply of rental units has increased, and the decline in rents is normal, which has also "dampened" the overall inflation figures.
In terms of the composition of the index, housing rent accounts for nearly 40%. Is the ratio too high for the index to fully reflect the problem of price increases faced by the public?
The economist Professor Lei Dingming pointed out that there are indeed people who think that certain price increases make the index unable to reflect real life. However, he believes that the composition of the index has already divided the proportions of people with different incomes, and many people still want to rent houses. Therefore, it is reasonable that housing accounts for nearly 40%.
The price of imported goods continues to rise with the depreciation of the US dollar
If the situation persists, does it mean that Hong Kong's inflation rate will continue to be at a low level?
Lei Dingming emphasized that economic recession does not necessarily have deflation, and it may face the problem of stagflation. Due to the outbreak of the epidemic, the Federal Reserve has "released a lot of water". The United States continues to print silver and paper. Even if the amount of Hong Kong currency does not change, the Hong Kong dollar will follow the US dollar. Depreciation, he estimated that the depreciation of the U.S. dollar has not completely ended, and that the Hong Kong dollar is under depreciation pressure against other currencies, especially for the renminbi. He believes that the price of imported goods will continue to rise. It is expected that Hong Kong's inflation will rise by 1 to 3% in the second half of the year.
Lei Dingming emphasized that economic recession does not necessarily have deflation, and it may face stagflation.
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Associate Professor Zhuang Tailiang of the Department of Economics at CUHK stated that even when the entire population was fully employed, the inflation rate was actually only 2 to 3%. Although Hong Kong did not have a monetary policy, it could solve inflation with fiscal policy. For example, the government could reduce expenditures, increase taxes, and increase taxes. Cutting the salaries of civil servants and reducing the consumption of the public can make the inflation rate fall again.
Although inflation in the United States rose to a 13-year high last month, the government has also taken measures to adjust prices. For example, there is no increase in subway fares, and civil servants’ salaries are frozen. Rents should remain at the current level for the time being, and the expected inflation rate will only rise by about 1%.
Associate Professor Zhuang Tailiang of the Department of Economics at CUHK stated that even if the entire population was employed in the past, the inflation rate was actually only 2 to 3%.
Inflation is heating up | Shipping costs push up food prices
Xue Junsheng pointed out that businesses must always face the problem of rising costs, but there are still many unknown factors whether they are able to increase prices. When upstream prices will shift to consumer prices, it depends on the affordability of the public and the progress of economic recovery. He estimated that this year is the third The quarterly inflation was 2%, the fourth quarter was 1.7%, and the annual average was 1.5%, which is similar to the 1.6% increase expected by the government.
As for the government's forthcoming issuance of $5,000 consumer vouchers, will the increase in consumer desire be an incentive for merchants to increase prices?
Lei Dingming believes that the opportunity is small, mainly because Hong Kong is in a situation of insufficient demand, and the distribution of consumer coupons is only to stimulate demand; Xue Junsheng also pointed out that the consumption of coupons will be divided into several periods, which will disguise inflationary pressures, and there will be no further inflation expectations in Hong Kong. The problem of heating up.
Inflation Hong Kong Economy