THE ECONOMY
In the industrial property market, the ongoing relocation of manufacturing processes to China continued to dampen the sales and rental markets for conventional flatted factory premises. But modern industrial premises designed also for office-use fared better, with moderate increases in prices and rentals during 1994. Trading and leasing activities nevertheless slowed in the latter part of the year. There was a keen interest in acquiring old industrial buildings with potential for redevelopment into modern industrial-cum-office buildings earlier in the year. But with the turn in market sentiment this interest was also dampened towards the year's end.
The response to the government land auctions became less favourable as the year wore on. For instance, the price fetched in the auction of a residential site in March was better than expected. In contrast, a residential site put up in the auction in December was withdrawn in the absence of bidders.
Inflation
Consumer price inflation measured in terms of the Consumer Price Index (A), or CPI(A), moderated further to 8.1 per cent in 1994, from 8.5 per cent in 1993. The CPI(B) rose by 8.6 per cent in 1994, close to the increase of 8.7 per cent in 1993. The Hang Seng CPI, however, showed a faster rate of increase of 10.1 per cent in 1994, compared with 9.5 per cent in 1993. This was partly because increases in housing rentals and in the prices of various consumer services had a stronger influence on households covered by the Hang Seng CPI than those covered by the CPI(A) and CPI(B). The Composite CPI, as an aggregate measure of consumer price inflation covering these three indices, rose by 8.8 per cent in 1994, the same as in 1993.
The year-on-year rate of increase in the CPI(A) decelerated markedly to 7.3 per cent in the first quarter of 1994, from 8.7 per cent in the fourth quarter of 1993. It then rose again to 7.7 per cent in the second quarter and further to 8.9 per cent in the third quarter, before moderating to 8.5 per cent in the fourth quarter. This fluctuation was attributable mainly to volatility in the prices of vegetables and certain other fresh food items, due to the serious flooding in South China and several rainstorms in Hong Kong during the summer.
Among the various components of the CPI(A), the prices of consumer services showed the fastest increase, up by an average of 12 per cent in 1994. This was followed by housing rentals, transport fares, and the prices of clothing and footwear, with increases of 11 per cent, nine per cent and nine per cent, respectively. These four components together accounted for 59 per cent of the overall increase in the CPI(A). The corresponding proportions of the overall increase accounted for by these five components in the CPI(B), Hang Seng CPI and Composite CPI were 66 per cent, 74 per cent and 66 per cent, respectively.
The prices of miscellaneous goods, food, alcoholic drinks and tobacco, fuel and light and durable goods rose less rapidly, by seven per cent, six per cent, six per cent, three per cent and three per cent, respectively. Since faster price increases were recorded mainly for items with a larger local input, inflationary pressures were still basically generated domestically. There was, however, a rise in imported inflation in the latter part of the year, as import prices rose more swiftly along with the weakening of the Hong Kong dollar in line with the US dollar and the general uptrend in basic commodity prices and product prices in the world market.
73