HONG Kong's consumer prices slid 3.6 per cent in December from a year
earlier as the government waived public-housing rental payments and
rising unemployment deterred spending.
This outstripped the decline of 1.4 per cent in November, the
government said. The plunge was also well above the 1.5 per cent
decline tipped by analysts.
Prices have plummeted for 38 straight months, taking the index to
95.3, after layoff fears and frozen wages stifled consumer spending,
forcing retailers and landlords to keep a lid on prices. The Consumer
Price Index (CPI) was 97.6 in November.
The much larger year-on-year decline in the CPI for December, compared
with November, was attributed to the waiver of public housing rentals
by the Housing Authority and Housing Society, the Census and
Statistics Department showed. The government gave tenants in public
housing projects a one-month exemption from rental payments in
December to spur consumer spending as economic growth stalled.
That caused housing costs, which make up about a third of the index,
to fall 8.7 per cent from a year earlier.
Prices of home appliances and other durable goods fell 7 per cent from
a year earlier, the report showed. Food costs, which make up about a
third of the price index, declined 2 per cent.
Declines were recorded in all indices of the CPI, which reflected
subdued price conditions amidst the poor economic situation and a fall
in import prices, a government spokesman said.
Unemployment edged to 6.1 per cent in December, a two-year high, as
companies such as HSBC Holdings and Pacific Century CyberWorks shed
"Rising joblessness and shrinking retail sales are undercutting
prices on the demand side," said Michael Kurtz, an economist at Bear
Stearns Asia in Hong Kong. For 2001, prices declined 1.6 per cent,
today's report showed.
Hong Kong's economy, which is expected to post zero growth last year,
may have to fall further. Chief Executive Tung Chee-hwa forecast
earlier this month that gross domestic product will probably shrink in
the first half of 2002, delaying a rebound in prices.
HSBC, Europe's biggest bank by market value, fired 70 Hong Kong staff
last month and said more layoffs may follow as growth stalls.
CyberWorks, the territory's biggest phone company, sacked 506 workers,
or 3.6 per cent of its staff, citing tougher competition.
Job cuts have continued this year with the Bank of East Asia, Level 3
Communications and Eastman Chemical all saying this month that they
plan to reduce their payroll in Hong Kong.
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