ENG-2003 — Page 97

THE ECONOMY

Analysed by sub-index, the CPI(A) and CPI(B) likewise had lesser declines in 2003, by 2.1 per cent and 2.7 per cent respectively, than in 2002, by 3.2 per cent and 3.1 per cent. As to the CPI(C), the decrease however widened slightly, from 2.8 per cent to 2.9 per cent. This was mainly due to lower rentals for private housing and reduced charges for package tours during the past year, which tended to benefit the higher- income households more. The quarterly profiles of these sub-indices were nevertheless similar, characterised in general by enlarged declines in the second and third quarters yet moderated falls in the first and fourth quarters.

The GDP deflator, as a broad measure of overall price change in the economy, dipped by 5.1 per cent in 2003, distinctly larger than the 3.0 per cent decrease in 2002. Yet the year-on-year decline in the fourth quarter of 2003, by 4.8 per cent, was narrowed from the widening declines in the second and third quarters, by 5.4 per cent and 5.7 per cent respectively, though still exceeding the decline in the first quarter, by 4.6 per cent. The larger fall in the GDP deflator in 2003 than in 2002 was mainly attributable to a worsening in the terms of trade in goods and services as well as an accentuated decline in the price deflator for government consumption expenditure, which more than offset moderated declines in the price deflators for gross domestic fixed capital formation and private consumption expenditure. Within the GDP deflator, the domestic demand deflator and the total final demand deflator nevertheless had lesser decreases in 2003 than in 2002, by 3.8 per cent and 2.4 per cent respectively as against 4.5 per cent and 3.5 per cent (Chart 16).

Chart 16

Per cent

6

2

0

Main inflation indicators (year-on-year rate of change)

-2

Composite CPI

-4

-6

-8

GDP deflator

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

1998

1999

2000

2001

2002

2003

Both the Composite CPI and the GDP deflator continued to decline in 2003, but the decline narrowed visibly towards the year-end.

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