Hong Kong's consumer price index likely rose in October

HONG KONG: Hong Kong's consumer price index, a key barometer for inflation, likely rose in October, lifted by higher rental rates, economists said. 

A Dow Jones Newswires poll of seven economists projected CPI - to be announced Tuesday - to rise 1.8 percent from a year earlier in October. 

The increase follows a 1.6 percent gain in September and the 1.4 percent rise in August. 

Hong Kong's CPI inflation has been modest this year, but the pace has begun to pick up as the rental component of the index starts to show the effect of a two-year-long boom in the local property market. 

Rising fuel prices have also been a factor, as has a stronger economy that allows retailers to pass on cost increases for food and clothing. 

"We expect another month of steady pickup in inflation in October. House rent should record a larger year-on-year increase, further reflecting the rental rises since two years ago,'' Citigroup economists wrote in a research report. 

Fuel costs, however, retreated somewhat in October, and prices of durable goods are likely to continue to fall as more furniture and electronics are manufactured at low-cost locations in China, they said. 

Still, the overall trend for the consumer price index is expected to be firmly upward, mainly because of the continued strength in the local economy and the gradualincorporation of higher property prices into new leases. 

The government expects the CPI to be up 1.5 percent for all of 2005. Since the index is now just 0.9 percent higher for the first nine months of the year, that implies a further acceleration in the monthly rate. 

Many economists say they are expecting increases of 2 percent or more by year's end. - AP 

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