The Composite Consumer Price Index fell by 4% in July from a year earlier, larger than the 3.1% recorded in June.

This suggests that even though sentiment improved after the SARS outbreak was contained, local retailers and service providers generally continued to keep prices low to foster sales.

This is mainly due to the downward effect of the rates concession the Government granted for the third quarter of this year. It had the effect of lowering the Composite CPI by 0.9 of a percentage point in July from a year earlier.

Netting out such an effect, the Composite CPI was still about 3% lower in July than a year earlier. 

With the effect of the rates concession taken aside, changes in the prices of the major commodity items largely balanced themselves out. 

Housing rentals, transport costs and food prices fall

While decreases were seen in private housing rentals, transport cost and prices of basic foodstuffs, more moderate declines were observed in prices of clothing, footwear and durable goods, and the cost of meals at restaurants.

July's CPI continued to be affected by the special one-off rebate of electricity charges granted by a power company and the new fare concessions accorded by some public transport operators. 

Taken together, they were estimated to have lowered the Composite CPI by around 0.3 of a percentage point in both June and July over a year earlier.

Effects of water, sewage charges waiver not yet felt

The effect on the CPI of the waiver of water and sewage charges the Government is granting will emerge following its implementation from August through November.

Among the various CPI components, housing registered the largest year-on-year decline in prices in July (-7.7%). This was followed by durable goods (-7.1%), clothing and footwear (-4.8%), miscellaneous services (-4.7%), transport (-1.7%), meals bought away from home (-1.6%), food excluding meals bought away from home (-1.4%), and electricity, gas and water (-1.1%).

The prices of miscellaneous goods rose 0.7% in July.

Taking the first seven months of 2003 together, the Composite CPI declined by 2.5% from a year earlier. For the three months and 12 months ended July 2003, the Composite CPI declined by 3.2% and 2.7% respectively.