ENG-2015 — Page 82

Chart 13

3

The Economy

Prices and Rentals of Retail Shop Space and Office Space

(Jan 2012-100)

Retail shop space

Office space

Index

170

Feb 2013

Index

160

Feb 2013

155

160

150

Price index

Price index

145

150

140

135

140

130

125

130

Rental index

120

115

120

Rental index

110

110

105

100

100

Jan Jul Jan Jul Jan Jul Jan Jul

| 2012 | 2013 | 2014 | 2015 |

555

95

Jan Jul Jan Jul Jan Jul Jan Jul

| 2012 | 2013 | 2014 | 2015 |

Prices and rentals of retail shop and office space declined in the fourth

quarter.

As to demand-supply balance, the vacancy rate of retail shop space and office space rose from 7.3 per cent and 6.3 per cent at end-2014 to 7.7 per cent and 8.0 per cent at end-2015 respectively, while that for flatted factory space declined from 5.6 per cent to 5.0 per cent. These were below their respective long-term averages of 8.8 per cent, 10 per cent and 8.2 per cent over 1995-2014.

Price Movements

Consumer price inflation receded further in 2015. Netting out the effects of the government's one-off relief measures, underlying consumer price inflation retreated to 2.5 per cent in 2015 from 3.5 per cent in 2014, marking the fourth consecutive year of easing. In terms of the quarterly profile, underlying inflation fell from 2.7 per cent in the first quarter to 2.5 per cent in the second quarter, and slightly further to 2.4 per cent in the third quarter and 2.2 per cent (under 2014/15-based consumer price index) in the fourth quarter.

The easing trend was attributed to a further moderation in imported inflation, thanks to weak international food and commodity prices as well as the strength of the US dollar. Domestic cost pressures also remained moderate in the midst of the economic slowdown. Rises in labour costs were broadly steady. Rental inflation held generally stable during most of 2015, with some easing towards the end of the year given the setback in retail sales and consolidation of the property market. The weakness in retail sales, largely impaired by the slowdown of inbound tourism, also restrained the pricing power of retailers and other related businesses.

Headline consumer price inflation, which is under the influence of the government's one-off relief measures, likewise moderated to 3.0 per cent in 2015 from 4.4 per cent in 2014.

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