this year, following a strong revival of trading activity in
1985. Prices and rentals of offices in prime locations firmed
up during the first half (paragraph 5.13). Prices and rentals
of industrial property also appear to have shown some mild increase during this period (paragraph 5.14). As regards
building intentions, planned developments of all major types of property increased in the first half of 1986 compared with the first half of 1985 (paragraph 5.15).
Inflation and the monetary aggregates
1.7
of 1986.
The rate of inflation remained low in the first half
Comparing the second quarter of 1986 with the same
quarter last year, the Consumer Price Index (A) was 2.5%
higher; the corresponding increase for the first quarter of this year was 2.6%. Among the favourable factors, aggregate demand in the economy was not so strong as to impose undue
pressure on the aggregate supply of resources, and movements
of world commodity prices were generally favourable.
1.8
Under the linked exchange rate system, the Hong Kong
dollar exchange rate against the US dollar remained stable
throughout the first half of 1986. However, reflecting the
continuing decline in the exchange rate of the US dollar
against other major currencies, the overall value of the Hong
Kong dollar, in terms of the trade-weighted exchange rate
index, fell from 70.6 at the end of December 1985 to 65.4 at the end of June 1986 (paragraph 3.17).
1.9
Hong Kong dollar deposits continued to grow during the first half of 1986, albeit at a slower rate than last year (paragraph 3.4). Foreign currency deposits continued to grow faster than Hong Kong dollar deposits (paragraph 3.5). The
money supply showed similar changes. Total money supply,
except total M2, grew at slower rates than during the same
period last year (paragraph 3.9). As the economy improved in
3
/the