ENG-2017 — Page 88

Chart 13

3

The Economy

Prices and Rentals of Retail Shop Space and Office Space

Retail shop space

(Jan 2013=100)

Office space

120

115

110

105

Index

140

*Feb 2013

Rental index

135

130

125

Index

Feb 2013

Rental index

120

20

N N

Price index

115

110

105

100

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

Price Movements

| 2013 | 2014 | 2015 | 2016 | 2017 |

Price index

100

Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

| 2013 | 2014 | 2015 | 2016 | 2017 |

Prices and rentals of retail shop space and office space increased by varying extents during 2017.

Consumer price inflation moderated in 2017, thanks to largely contained domestic and external price pressures. Headline consumer price inflation, which is under the influence of the government's one-off relief measures, moderated to 1.5 per cent in 2017 from 2.4 per cent in 2016. Netting out the effects of those one-off measures, underlying consumer price inflation likewise dropped to 1.7 per cent in 2017 from 2.3 per cent in 2016. The lower headline rate as compared with the underlying rate in 2017 was due to an extra quarter of one-off rates concession in 2017 as against 2016. The quarterly profile of underlying inflation dipped temporarily to 1.4 per cent in the first quarter due to the high base of comparison for food prices a year earlier and a late Easter holiday in April, then receded from 2.0 per cent in the second quarter to 1.7 per cent in the third quarter, and further to 1.6 per cent in the fourth quarter.

External price pressures were modest, as inflation in Hong Kong's major import partners stayed mild, notwithstanding some slightly higher import price pressure towards the latter part of the year due to the global economic upswing and depreciation of the US dollar. Locally, rental cost pressures as reflected in consumer price inflation were moderate in 2017, given that the general uptrend in fresh-letting residential rentals over the year fed through only gradually. The rise in labour costs was also in check when reckoned on a unit cost basis, as increases in labour earnings were accompanied by notable gains in labour productivity amid sustained above- trend economic growth.

The GDP deflator rose 3.0 per cent in 2017, faster than its 1.7 per cent increase in 2016. This was driven mainly by a pick-up in the domestic demand deflator, reflecting in part the surge in asset prices during the year (chart 14).

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