CODE 18-77
INFLATION
Reference..................
11. The year-on-year inflation rate (CPI(A)) was 2.6% in this quarter, representing a further fall in the rate. This improvement has come through soft commodity prices, particularly oil, but import prices have started to rise in HK$ terms because of currency depreciation (against most major currencies, with the important exception of the Renminbi). As these higher import prices filter through there is likely to be a rise in the inflation rate.
COMMENT
12. This is a fairly encouraging picture, but further improvements will be needed if the budget forecast is to be met. This had real domestic export growth of 7.5% for 1986, and a 10% rate for the US market (representing however only a catching-up to 1984 levels after the declines of 1985). Exporters must hope that the delayed effects of improved price competitiveness are increasingly apparent during the year.
5 June 1986
Nick Hallet
N O Hallett
Economic Advisers