THE ECONOMY
60
slashed substantially further by 25 per cent in 2001, after a 16 per cent drop in 2000. Decreases of varying magnitudes were observed in all main types of property.
Price Movement
Overall consumer prices fell for the third consecutive year in 2001, though to a distinctly smaller degree than in the preceding two years. A narrowing rate of decline was observed in the first seven months of 2001, when there was some resurrection in domestically generated price pressure, along with a modest increase in labour wages and earnings as well as upward adjustments in certain government fees and public utility charges. This partly offset the effect of lower import prices. But the rate of decline widened again in the remainder of the year, as local price pressure subsided amidst more instances of pay freeze or pay cuts as well as further easing in property rentals. Concurrently, import prices went even lower, due to the US dollar strengthening against the currencies of most of the major supplier economies and world commodity prices plummeting after the September 11 incidents. Furthermore, in face of moderated consumer spending, local retailers generally offered greater price discounts in order to promote sales. Certain public transport operators also began to grant concessions on their fares. Thus the negative inflation persisted.
For 2001 as a whole, the Composite CPI was down by 1.6 per cent, considerably reduced from the 3.8 per cent fall in 2000. The year-on-year decrease narrowed progressively, from 2.0 per cent in the first quarter of 2001 to 1.3 per cent in the second quarter and further to 1.0 per cent in the third quarter, along with lesser declines in food prices and housing cost. Yet the decrease widened again in the fourth quarter, to 2.1 per cent, upon a sharp fall in public housing cost brought about by the waiver of public housing rentals in December. Also partly contributed were an enlarged decline in food prices and a downward adjustment in the charges for Towngas and liquefied petroleum gas.
A broadly similar profile was observed for all the sub-indices. On a year-on-year comparison, the decreases in the CPI(A), CPI(B) and CPI(C) likewise dwindled progressively, from 2.0 per cent, 2.1 per cent and 1.8 per cent respectively in the first quarter of 2001 to 1.1 per cent, 1.4 per cent and 1.4 per cent in the second quarter, and further to 0.7 per cent, 1.2 per cent and 1.3 per cent in the third quarter. The decreases then widened again, to 2.8 per cent, 1.9 per cent and 1.5 per cent in the fourth quarter. The waiver of public housing rentals tended to have a larger dampening effect on the CPI(A) than on the CPI(B), yet with nil effect on the CPI(C). For 2001 as a whole, the three sub-indices were down by 1.7 per cent, 1.6 per cent and 1.5 per cent respectively, all smaller than the decreases of 3.0 per cent, 3.9 per cent and 4.5 per cent in 2000.
The GDP deflator, as a broad measure of overall price change in the economy, rebounded to a 0.5 per cent rise in the fourth quarter of 2001 over a year earlier, after declining at a narrowing rate by 1.7 per cent, 0.6 per cent and 0.2 per cent respectively in the first three quarters. This small rebound was due almost entirely to an improvement in the terms of trade. For 2001 as a whole, the GDP deflator fell by 0.5 per cent, much reduced from the 6.5 per cent decrease in 2000. This was mainly attributable to a moderated decline in the price deflator for private consumption expenditure and a rebound in the price deflator for government consumption expenditure. While the price deflator for exports of goods and services registered a widening decline over the course of the year, this was more than offset by an even