ENG-2011 — Page 102

66 The Economy

Chart 16

Index

320

280

Prices and Rentals of Office Space (1999=100)

240

Price index

200

160

120

80

Rental index

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct

2007

2008

2009

2010

2011

Prices and rentals of office space rose rapidly during the first three quarters,

but showed signs of tapering thereafter.

Reflecting the solid take-up relative to completion, vacancy rates for office space and flatted factory space fell from 8 per cent and 6.7 per cent to 6.5 per cent and 6 per cent respectively. Meanwhile, vacancy rate for commercial space edged up from 7.9 per cent to 8 per cent.

Price Movements

Inflation was on a notable uptrend during most of 2011 under the influence of both external and domestic factors. On the external front, the notable increases in import prices, driven by the surges of global food and commodity prices from late 2010 through early 2011, played a significant role in driving up local inflation. Domestically, the strong economic upswing in 2010 and early 2011, coupled with the one-off effect from the implementation of SMW in May 2011, resulted in higher local business costs and added further inflationary pressures. Nevertheless, with global food and commodity prices generally easing back after the first quarter and with the moderation in local economic growth over the course of the year, inflation stabilised on entering the fourth quarter.

The Composite Consumer Price Index (Composite CPI) rose by an average of 5.3 per cent in 2011, up from 2.4 per cent in 2010. Netting the effects of the Government's one-off relief measures to give a more accurate indicator of the inflation trend, underlying consumer price inflation also averaged at 5.3 per cent for 2011 as a whole, up from 1.7 per cent in 2010. In terms of the quarterly profile, underlying inflation went up visibly from 3.7 per cent in the first quarter, to 5 per cent and 6.1 per cent respectively in the second and third quarters, and slightly further to 6.4 per cent in the fourth quarter.