Consumer Price Index

The Consumer Price Index (CPI) measures the changes over time in the price level of consumer goods and services generally purchased by households. The year-on-year rate of change in the CPI is widely used as an indicator of the inflation affecting consumers.

Different series of CPIs are compiled by the Census and Statistics Department (C&SD) to reflect the impact of consumer price changes on households in different expenditure ranges. The CPI(A), CPI(B) and CPI(C) are compiled based on the expenditure patterns of households in the relatively low, medium and relatively high expenditure ranges respectively. A Composite CPI is compiled based on the overall expenditure pattern of all the above households taken together to reflect the impact of consumer price changes on the household sector as a whole.

The expenditure weights of the 2004/05-based CPI series currently in use are derived based on the household expenditure patterns obtained from the Household Expenditure Survey (HES) conducted during October 2004 to September 2005. The expenditure brackets for the CPI series are as follows:

It should be noted that the above expenditure ranges relate to prices in the base period from October 2004 to September 2005.  Taking into account the impact of price changes since the base period, the monthly household expenditure ranges of the CPI(A), CPI(B), and CPI(C) adjusted to the price level of 2007 are broadly equivalent to $4,100-$16,100, $16,100-$28,900 and $28,900-$63,200 respectively, and that of the Composite CPI is broadly equivalent to $4,100-$63,200. 

The expenditure levels of households change in response to factors such as changes in income level and prices. However, the household expenditure patterns (i.e. relative expenditure among various items of goods and services), which are used in the computation of the CPIs, are relatively stable and change only gradually over time. Furthermore, slight changes in the weightings for compiling CPIs would have insignificant impact on the movements of CPIs. Hence, it is appropriate to adopt fixed expenditure weights for compiling CPIs for several years after each round of rebasing.

Based on the above consideration, the C&SD, in line with international practice, conducts a new round of HES once every five years to update the expenditure pattern used in the computation of the CPI.

In addition to the expenditure weights, price data for individual items are also required in the compilation of the CPI. A Monthly Retail Price Survey is continuously conducted by the C&SD for this purpose. Each month, some 45 000 price quotations are collected from about 4 000 retail outlets and service providers throughout Hong Kong. Price data for such principal services as public transport and postal services are either collected directly from the companies concerned or obtained from administrative records. Data on private housing rentals for new, renewed and continued lettings are collected from a monthly sample survey on renter households residing in private housing. Data on public housing rentals are regularly provided by the Hong Kong Housing Authority and the Hong Kong Housing Society. 

For analyzing the latest trend in consumer prices, it is useful to study the year-on-year changes in the original CPI series and the month-to-month changes in the seasonally adjusted series together. In the seasonally adjusted series, seasonal variations have been eliminated by statistical methods, thus enabling figures for consecutive months to be compared more meaningfully.