ENG-1995 — Page 92

THE ECONOMY

Consumer Price Indices (year-on-year rate of increase)

14.0

13.0

Percent

Consumer Price

Index (A)

Consumer Price Index (B)

12.0

Composite

11.0

Consumer

Price Index

10.0

Hang Heng Consumer

Price Index

9.0

8.0

7.0

6.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

1990

1991

1992

1993

1994

1995

Consumer price inflation, after a temporary pick-up in the first quarter, moderated in the ensuing quarters.

三

Reflecting the easing in locally-generated inflationary pressures during 1995, those components of the CPI(A) with a large local content, such as housing rentals, transport fares; meals at restaurants and charges for various consumer services, all moderated during the year. This held for even the clothing and footwear, and consumer goods components which had a large import content and hence were affected more than the others by the earlier depreciation of the Hong Kong dollar and the uptrend in world commodity prices. Durable goods had a steadier price profile. The prices of fresh vegetables continued to exhibit considerable volatility during the year.

The GDP deflator, as a broad measure of overall inflation in the economy, showed an even greater moderation over the course of 1995. It rose by 4.6 per cent in 1995, compared with a 7.5 per cent increase in 1994. In the early part of 1995, the deterioration in the terms of trade as import prices rose faster than export prices initially slowed the increase in the GDP inflator. Later in the year, reduced domestically generated inflationary pressures led to a more moderate increase in the GDP inflator.

Economic Policy and Public Finances

Economic Policy

The government's basic policy of minimum interference and maximum support for the economy is a key factor underlying Hong Kong's continued economic success. Owing to its small size and open nature, the economy is vulnerable to external factors, and government actions designed to offset unfavourable external influences are of limited effectiveness.

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