ENG-2013 — Page 80

Chart 17

3

The Economy

Prices and Rentals of Office Space (Jan 2012=100)

Index

145

Feb 2013

140

135

Price index

130

125

120

115

110

Rental index

105

100

95

Jan Mar

May Jul Sep

2012

Nov Jan Mar

May

Jul Sep Nov

2013

Prices and rentals of office space saw moderate gains during 2013, mostly during the first quarter.

Reflecting the negative take-up and a positive net completion, the vacancy rates for non- residential properties rose during 2013. Specifically, the vacancy rate rose from 6.9 per cent at end-2012 to 7.2 per cent at end-2013 for commercial space, from 6 per cent to 7 per cent for office space, and from 5 per cent to 5.8 per cent for flatted factory space. However, these were still below their respective long-term averages over 1993-2012.

Price Movements

Consumer price inflation was largely contained in 2013, as import prices stayed subdued while domestic costs tended to stabilise. Externally, the rise in import prices narrowed in 2013, thanks to broadly steady international commodity prices and benign inflation in Hong Kong's major import sources. Locally, the rise in domestic rental costs (a major driver of inflation in the recent past) has been milder since early 2013, while labour costs maintained a steady increase.

Underlying consumer price inflation, which nets out the effects of the government's one-off relief measures, receded for two consecutive years to 4 per cent in 2013, from 5.3 per cent and 4.7 per cent respectively in 2011 and 2012. In terms of the quarterly profile, underlying inflation. held largely stable at 3.8 per cent and 3.9 per cent respectively in the first two quarters of 2013, and then climbed modestly to 4.3 per cent in the third quarter, before easing back to 4 per cent in the last quarter. The headline consumer price inflation averaged 4.3 per cent in 2013, as compared to 4.1 per cent in 2012.

The GDP deflator rose by 1.2 per cent in 2013, considerably down from a 3.7 per cent increase in 2012 (Chart 18).

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