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Hong Kong's deflation rate last month remained similar to that in March, but signs of recovery may indicate a stronger economy in the second quarter.
The government said the composite consumer price index (CPI) fell by 3.1 percent year on year in April.
It was the 42nd consecutive dip in the CPI, and was larger than the 2.2 percent decline in March.
But the increased year-on-year drop was partly due to the waiver of water and sewage charges and the additional rates concession as specified in the 2002-03 budget starting from April.
In addition, March's figure has a lower basis as a power company offered a one-off rebate on electricity charges in March last year.
"Netting out these particular factors, the year-on-year decline in overall consumer prices in April 2002 should have been broadly similar to that in March 2002," the government said in a statement.
Hui Wingfu, economist at the Bank of China (Hong Kong), agreed with the government assessment.
"Excluding the effects of governmental measures, the April CPI neither deteriorated nor improved," Hui said.
Consumer sentiment in Hong Kong remains weak amid the record-high jobless rate of 7.1 percent, but Hui said he saw signs of bouncing back in the overall economy.
"Recent positive data in exports, tourism and property market indicated that the economy has almost bottomed out ... I believed the second quarter will be better than the first quarter," he said.
The number of tourists to Hong Kong rose 12.4 percent, boosted by the central government's relaxed regulations on entering the city.
Hong Kong's two local airlines Dragonair and Cathay Pacific Airways carried about 3.6 percent more passengers in the first three months than in the same period last year while cargo tonnage jumped nearly 14 percent.
After recently announcing plans to buy six new aircraft and recruit 1,300 employees, Cathay yesterday said it would restore more services to the levels before the September 11 attacks.
The weak US dollar would also help Hong Kong export more given the currency peg.
However, the pace of recovery would be moderate this year and most of the analysts still stick to their economic forecast with concerns over the jobless rate, deflation and Hong Kong's competitiveness.
Standard & Poor's downgraded ratings of several major property companies earlier this week and predicted property prices to remain flat after falling more than half from the 1997 peak.
Unemployment is expected to reach its peak of about 7.5 percent in the third quarter, further depressing morale among residents.
After several international rating agencies voiced concern over Hong Kong's competitiveness, tycoon Li Ka-shing yesterday said residents should improve themselves first.
"Everybody should work hard and improve their competitiveness," Li said. As long as Hong Kong people have confidence and courage, the city will not loose its edges, he said.
(China Daily May 24, 2002)
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