Month-on-month figures suggest that deflation in Hong Kong may have ended, said Monetary Authority Chief Executive Joseph Yam.

The latest CPI figures suggested that overall consumer prices fell 1.9% in December compared with a year earlier.

In his Viewpoint column posted on the authority's homepage, Mr Yam said that he wished to know whether, in the month that has just past, consumer prices have continued to fall and, if so, at what rate.

"And so I wish to know when this fall amounting to 1.9% took place. Maybe prices have been falling in the first part of the year by, say, 3% and have since increased by 1.1%, so that the net decrease is 1.9%," he added.

Mr Yam suggested that the consumer prices in Hong Kong might have stopped falling around August 2003.

CPI on the rise since August 2003

"They seem to have been increasing since. Longer observation is needed before a firm conclusion can be drawn, but deflation - taking the word to mean an ongoing process of falling prices - may be over, and the turning point may have been in August 2003."

The Composite CPI for December 2002 was 93.8. It fell almost continuously during the first part of 2003 and by August it reached the lowest level on record of 91. Since August, it has been increasing, and by December it reached 92.

"In other words, there has been an increase over the period from August to December 2003 in the Composite CPI of 1.1%," Mr Yam concluded.