TNAG-2466-FCO40-3590-Economic-situation-in-Hong-Kong-1992 — Page 63

Mr Stone HKD

Reference

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HK. Ecoen.

11/5

23

HONG KONG INFLATION UPDATE

1. There was a welcome fall in the headline inflation rate (CPI A) to 9.5 per cent in March from 10.4 per cent in February largely as a result excise tax increases in the 1991/92 budget dropping out of the calculations. A chart is attached.

2.

Although inflation is likely to fall again in April (my minute of 9 March to Mr Cox) the downward trend of the past year is nearing an end. Prices of services (most notably housing) have risen for two consecutive months whilst goods inflation excluding alcohol and tobacco is steady at around 8 per cent.

Unless the pace of GDP growth slows (or perhaps large scale labour importation) inflation is likely to remain above 10 per cent for the forseeable future.

HKG have published a new 'composite index' which covers all income groups which shows inflation of 9.7 per cent in the year to March 1992.

3.

CODE 18-77

CE Lane

Economic Advisers WH 426b 270 2727

cc Mr Broadbent

8 May 1992