ENG-1991 — Page 77

THE ECONOMY

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showed that labour productivity in the manufacturing sector had risen significantly. This was attributable partly to the marked increase in investment in plant and machinery and partly to the relocation of the more labour-intensive production processes to China.

Comparing September 1991 with September 1990, average earnings in all sectors, in terms of payroll per person engaged, continued to show significant increases in money terms. However, the rates of increase for some of the major sectors were less rapid than in the preceding year. Of the various service sectors, average earnings in restaurants and hotels and in the wholesale, retail and import/export trades increased by 13 per cent and 12 per cent respectively in money terms, with both sectors showing an increase of one per cent in real terms. In transport, storage and communications, while average earnings increased by 12 per cent in money terms, there was virtually no change in real terms. In finance, insurance, real estate and business services, average earnings increased by eight per cent in money terms, but decreased by three per cent in real terms. Earnings in the manufacturing sector, which increased by 10 per cent in money terms, showed a decrease of one per cent in real terms. The rate of increase in construction wages was less rapid than in 1990. Between September 1990 and September 1991, construction wage rates rose by 11 per cent in money terms, but fell by one per cent in real terms.

The Property Market

The performance of the property market varied among sub-sectors. In the residential -property market, there was a strong underlying demand for small to medium-sized flats. Flat prices surged immediately after the ending of the Gulf war. The market gathered further strength in July with another upsurge in flat prices, following the announcement of the Sino-British Memorandum of Understanding on the implementation of the new airport and related projects. Apart from the support from end-users, speculative interests were also apparent, particularly in respect of pre-completion sales of flats in the major new developments. Demand for large residential flats also improved. The market for shopping space generally held steady. The market for office space was still dampened by over-supply. Both prices and rentals remained soft. However, there was a revival in activity in the sales market, towards the end of the year, given some shift in investment interest from residential property to office space. The market for industrial premises was still relatively quiet. Flatted factory space in the newer industrial areas nevertheless faced a greater demand than in other areas.

The favourable response to the various government land auctions conducted in 1991 was generally in line with market expectations. Developers were more inclined to invest in residential sites. Nevertheless, interest in industrial sites also improved.

Inflation

The rate of inflation at the consumer level, as measured by the Consumer Price Index (A), rose by an average of 12 per cent in 1991. This compared with an increase of 9.8 per cent in 1990. The inflation rate accelerated during the first four months of the year to a peak of 13.9 per cent in April, but showed a gradual easing thereafter. The package of counter-inflation measures adopted by the government in late May helped to dampen inflationary expectations in the economy. A temporary upsurge in the prices of certain essential foodstuffs led to a pick-up in the inflation rate in July and August. But as these prices stabilised, the trend of moderation in inflation continued. In December 1991, the inflation rate was 10.3 per cent.