Tuesday, May 03, 2011

Hong Kong CPI - adjusted downwards again

Every five years the Hong Kong government reviews and adjusts the basket of goods and services which comprise the Consumer Price Index (CPI).

As with previous adjustments, the result of this year's review was to reduce the leading measure of inflation for the year ended March 2011 from 4.57% to 4.38% - a fall of 0.19%.

While it is reasonable that the CPI composition be adjusted from time to time to reflect changes in what we, as consumers, collectively spend our money on, the fact that these reviews just about always result in downward revisions to inflation data casts doubts over the validity of the adjustments.

It's also worth noting that even at a reduced 4.38% pa, inflation is still high enough to do a lot of damage to the real spending power of consumers and the real wealth of investors. Inflation remains one of the biggest threats to a financially successful retirement.

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