Hong Kong consumers are feeling the pinch of rising costs from inflation, but with the world still gripped by Covid-19, is there light at the end of the tunnel?


From groceries to beef and petrol, Hongkongers have felt the pinch of rising prices from inflation, with the global economy and supply chains still gripped by the pandemic. In the first instalment of a three-part series, Denise Tsang and Fiona Sun explore how the city’s poorest are getting by.

Every time Hong Kong housewife May Liu goes to the wet market near her home in Kwai Chung, she worries about the price of everything.

The mother of two used to buy a cut of pork for HK$30 (US$3.80), but that sum will now get her less. A small piece of pork liver for noodles has doubled in price to HK$10. Staple leafy greens, choy sum, are now about HK$30 per kilogram, when they used to be under HK$20. She gets only four oranges for HK$20, not five.

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She said her family had been eating less. While food prices have risen, their household income fell through the Covid-19 pandemic as her husband, a part-time construction worker, had fewer jobs.

“I used to be able to feed my family for about HK$100 a day with a good amount of vegetables, fish and pork, but not any more,” Liu, 42, said.

Housewife May Liu (right) at the wet market in Sham Shui Po. Hongkongers are feeling the pinch of higher prices from inflation. Photo: Nora Tam

From soft drinks to vegetables, meat and petrol, Hongkongers are feeling the pinch of higher prices from inflation, and all signs are that the worst is yet to come.

The global supply chain, disrupted by almost two years of lockdowns resulting from the Covid-19 pandemic, remains affected by the shortage of crew, containers and capacity at major ports in the United States and Europe, which sent shipping costs skyrocketing.

Fuelling the crisis is rising demand as developed economies rebound. Heavily reliant on imports, Hong Kong cannot escape unscathed from the effects of global inflation even with its economy also on track to bounce back.

“Overall inflationary pressures are likely to increase somewhat in the near term alongside the economic recovery and rising import prices,” a spokeswoman with the Financial Secretary’s Office told the Post.

Although major central banks earlier forecast global inflation to be transitory, she said it would now last longer than expected.

For Hong Kong, much now depends on how long it will take for global supply to return to normal and catch up with the growth in demand.

Higher commodity prices were reflected in the year-on-year 6.5 per cent jump in import prices for July to September, accelerating from 4.7 per cent in the second quarter. Last year, the city recorded inflation of 0.3 per cent over the full year.

Consumers are hit when pay rises, if any, lag behind swelling inflation. The city’s consumer price index, calculated from the change in prices for a mix of goods and services and a measure of inflation, has risen for 10 months by between 0.5 per cent and 3.7 per cent.

Wage rises, at 0.7 per cent for January to March this year and 1.1 per cent in the second quarter, were at the lowest levels in over a decade.

Carlos Casanova, senior Asia economist with Swiss private bank Union Bancaire Privee, forecast Hong Kong’s inflation rate to grow 2 per cent next year, up from this year’s estimated 1.5 per cent rise.

“We are witnessing a period of both high inflation and sustained growth,” he said. “It will take many quarters to resolve the global supply chain issues.”

A spokeswoman with ParknShop, one of the largest supermarket chains in the city, said it expected higher commodity prices and logistics costs – which have tripled through the pandemic - to spill into the first three months of next year.

‘Enough food, but it costs more’

The United States shocked the market on November 10 by revealing a highest rate of inflation in 31 years with its consumer price index hitting 6.2 per cent growth year on year because of higher prices in energy, food and used cars. Analysts expect it to touch 7 per cent and lead to an interest rate rise sooner than expected.

Nigel Green, founder and CEO of financial consultancy firm DeVere Group, said the US data compounded fears of global inflation.

He said inflation in Britain could jump to more than 5 per cent by early next year, noting that the Eurozone’s annual inflation rate came in at a record 4.9 per cent in November from 4.1 per cent the month before, and China’s factory gate prices surged a record 13.5 per cent.

“There are increasing signals that consumers are now feeling the pain,” he said.

Surging food and utility bills spark inflation warning in Hong Kong

Intertwined most closely with Hong Kong is mainland China, which supplies 25 per cent of the city’s imported food and 51 per cent of its fuel supplies.

There was panic buying of food by millions of mainland Chinese recently, after Beijing warned of a colder winter brought on by the so-called El Nina weather effect and advised people to stock up for the winter.

There were frenzied scenes of shoppers fighting for food, with some wheeling away entire pig carcasses from supermarkets, before the authorities urged calm and assured everyone that there was no imminent shortage.

Thomas Ng Wing-yan, chairman of the Hong Kong Food Council, an alliance of about 30 food related business groups, said there was no fear the city would run out either.

“Don’t panic, Hong Kong still has sufficient food supplies, it just costs more,” he said.

He said food prices in the city were generally up 10 per cent in July from the same month last year and if the pandemic did not stabilise globally, food costs could continue to rise.

Danny Lau Tat-pong, honorary chairman of the Hong Kong Small and Medium Enterprises Association, said his canned food business showed that higher inflation on the mainland had spilled into the city.

Mainland food producers had raised their factory-gate prices for canned food by as much as 15 per cent for beef products and 5 per cent for pork items.

“We sense the producers are going to lift prices again, which is unusual, and we are writing to them to explain this is not a right time because of Hong Kong’s poor economic situation,” he said.

Yuen Cheong, chairman of the Hong Kong Imported Vegetable Wholesale Merchants Association, said a colder winter threatened to raise vegetable prices – which had already gone up – until Lunar New Year next February.

Costlier produce would mean bigger food bills all round, but he said: “We have no choice but to pass the higher costs to consumers.”

At the bustling Bowrington Road wet market in Causeway Bay, vendors have begun using a new strategy to ease the shock of rising prices to shoppers.

Instead of displaying vegetable prices by the catty (0.6kg), they mark them by the half catty as well. So spinach, for example, is on sale at HK$12 half a catty and HK$20 a catty. The prices of other vegetables are up too.

Beef prices have soared. The wholesale prices of US prime rib-eye has spiked by 52 per cent to a record of nearly US$20 per pound early this month from a year ago while the mid-quality rib-eye has risen by 33 per cent during the same period.

Joel Haggard, senior vice-president with the US Meat Export Federation, said restaurant operators and diners were feeling the impact of higher-priced Angus beef, Hongkongers’ favourite for hotpot or fine dining.

The beef in your hotpot is going to cost more, and that’s not all

“We’ve had a number of phone calls from people who run restaurants, asking what they could do because rib-eyes cost more and they can’t keep changing the prices on the menu to reflect the cost increases,” he said.

Ng Fung Hong, the city’s sole importer of fresh beef from across the border, said the higher cost of raising cattle and robust demand on the mainland led to a surge in wholesale prices by 7.3 per cent in the first half of this year from last year, on top of the 5.9 per cent increase last year from 2019.

Even rice prices have gone up. According to Trade Industry Department statistics, retail prices of Chinese Yu Jien, a popular type of rice from China, jumped the most at 4.2 per cent in the third quarter of this year to HK$13.22 per kg compared with the first three months of the year.

This was followed by a 2 per cent rise in the price of Thai Fragrant rice to HK$13.70 per kg, and a 3.83 per cent rise in Vietnamese Fragrant rice to HK$10.83 per kg.

Hong Kong Food Council chairman Thomas Ng assures residents that food supplies will not run out, although they will now cost more. Photo: Nora Tam

With global economies pressing ahead with recovery, fuel prices have skyrocketed and Hong Kong households and businesses are bracing themselves for higher electricity bills next year.

Petrol and diesel prices have risen to their highest in about seven years in Hong Kong, the most expensive in 164 markets, according to data compiled by research institute globalpetrolprices.com.

The Hong Kong Land Transport Alliance, an umbrella group representing over a dozen transport groups and tens of thousands of drivers, earlier this month raised the issue with the government and asked for a lifeline.

Electricity bills are poised to rise in January. Users on Hong Kong Island will have to pay 7 per cent more to Hongkong Electric, while customers of CLP Power in the New Territories, Kowloon and Lantau will face a 5.8 per cent hike. They would have to pay even more if not for the subsidies from the utilities companies.

More families seek help

The rising inflation is felt across the board, but the city’s poorest are hit the hardest.

Housewife May Liu, who came to Hong Kong from Dongguan in 2006, lives with her mainlander husband, 51, and their sons aged 18 and three, in a 200 sq ft unit, paying a monthly rent of HK$6,800.

As a part-time construction worker, her husband used to earn about HK$7,000 a month at the most, but his working hours were slashed during the pandemic. At one point, he managed to get only one day’s work in a month, at the daily rate of HK$600.

Monthly government welfare allowances of about HK$14,000 relieve some of the family’s financial burden, but Liu said they still failed to pay their rent on time.

Hong Kong’s soaring fuel prices push bus, taxi drivers to breaking point

She receives rice and noodles from charities, and buys cheaper potatoes and tomatoes rather than meat. They also cut down on other expenses like clothes. Friends sometimes give her clothes for her younger son.

“We try to save as much as we can,” she said. “But we still need to eat, especially my sons who are growing up.”

Sze Lai-shan, deputy director of the Society for Community Organisation, said more than 4,000 new families sought help from the NGO in the past year, taking the total it assisted to about 12,000.

“Many of the new cases were hit by not only the much higher cost of living but also joblessness or having insufficient work. Some, who were used to being in the middle class, told me they never expected they would have to seek help from us,” she said.

Grass-roots families have been hit harder by inflation overall, as reflected in the 2.1 per cent rise in October’s consumer price index for households with monthly expenditure of HK$6,500 to HK$27,999. That exceeded the overall composite price index growth of 1.4 per cent that month.

Hong Kong residents to pay up to 7 per cent more for power from January

The index for grass-roots households reflects prices for electricity, gas, water, clothing, footwear, transport, meals and takeaways, consumer durables, basic food and miscellaneous services.

Hong Kong’s poverty rate also hit a 12-year peak of 23.6 per cent this year, which put 1.65 million people below the poverty line, set at 50 per cent of the median household income by household size.

Household incomes shrank 5.6 per cent, with grass-roots households the worst off, registering a drop of 8.1 per cent last year from 2019.

Sze said: “After almost two years in lockdown, many of the people we are helping are still jobless and some of them have to borrow money to survive in addition to getting the government’s welfare allowance.”

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