Price rally: December saw a larger year-on-year consumer price increase with overall prices up 3.8% on the same period last year mainly due food price hikes.

December saw a larger year-on-year consumer price increase with overall prices up 3.8% on the same period last year, the Census & Statistics Department says.

The increase was mainly due to rising prices for pork, package tours and meals bought away from home.

The department said the gradual rise in inflationary pressures last year should be viewed together with the sustained robust expansion of the local economy, the strength of consumer spending and similar inflation situations in many parts of the world now.

Global rises in food and oil prices and the weakening of the US dollar and appreciation of the renminbi will continue to pose upside risks to inflation. While recent upward trends in private housing rentals should be monitored, sustained labour productivity growth will provide some cushioning to upward price pressures.

Food inflation

The month saw large year-on-year price increases for food (11.7%) - pork (42.9%), beef (38.8%), canned meat (34.1%), eggs (22.3%), frozen meat (18.1%), other meat (21.8%) and edible oils (16%).

Increases were also recorded for electricity, gas and water (5.1%), housing (4.3%), meals bought away from home (4%), miscellaneous goods (3.9%), clothing and footwear (2.4%) and alcohol and tobacco (0.1%). A price drop was recorded for durable goods (-3.8%).

Consumer prices for miscellaneous services rose 1.6% and 0.5% for transport.

The fourth quarter saw year-on-year consumer prices rise 3.5%. For 2007 as a whole the price index was on average 2% higher than in the preceding 12-month period, mainly attributable to large increases in the price of basic foodstuffs (7.1%) and private housing rentals (4%). The department said the 2% figure is the same as the Government's earlier forecast.

Other commodity and service sectors recorded small price rises or even drops which moderated the overall increase, such as falls in kindergarten school fees due to the implementation of Pre-primary Education Voucher Scheme, telecommunications service charges, and video and sound equipment prices. Public housing rent also dipped due mainly to rent cuts from August.