Economists say, Hong Kong consumer prices seem to remain steady

Hong Kong'sretail price index a closely watched inflation barometer likely remained steady at less than 2 percent in December, economists said, with continuing increases in rental costs offset by weaker gains in consumer goods. A Dow Jones Newswires poll of 10 economists centered on an increase of 1.8 percent in December's consumer price index from a year earlier, following the 1.7 percent rise in November and 1.8 percent gain in October.

"The labor market has been tightening this year, and strengthening labor demand has prompted Hong Kong's companies to raise salaries," Lehman Brothers wrote in a research report.

"Higher rental costs are starting to feed into the housing component of the CPI," the report added.

Nevertheless, durable goods prices have been falling and clothing prices have been rising only modestly in recent months. Falling food prices and the pullback in energy costs from recent highs would help keep inflation from accelerating further in December, said the Lehman economists, whose forecast matched the survey's median.

Hong Kong's consumer price inflation rose more than 1 percent for the first time in six years in the middle of 2005, but price increases haven't been steep by international standards. Analysts generally expect inflation to pick up further in future, but not to particularly high rates.

"The inflation rate will rise mildly to between 2 percent-2.5 percent in the coming months on steady consumption demand and rising rentals," said DBS Bank strategist Daniel Chan, reports the AP.

D.M.