Introduction
Hong Kong Prices Index (HKP) is a measure of living costs in Hong Kong. The index combines the monthly percentage change in prices of a broad collection of goods and services in the city. It is used as an indicator to help economists and policy makers understand the change in the cost of living in Hong Kong or make adjustments in fiscal and monetary policy.
Background
The HKP was first published in December 1989, by the Hong Kong government’s Statistical Service and is based on a basket of good and services consumed by households. It is compiled every month and adjusts for seasonal factors, as well as inflation. It is also updated regularly to take into account new products and services, as well as changes in price. It is an accurate measure of price trends in the city and reflects the cost of living for residents.
Components of the Index
The HKP consists of three major components, which are weighted for the index calculation. The basic price index is made up of the 90 most commonly used goods and services in the city. These items have the highest contribution to the overall costs of living in Hong Kong. The second component is made up of the 20 most expensive items which are purchased by around 15% of households and make up the Luxury Price Index. Lastly, the 90 most widely used services, such as public transportation, health care and education services, make up the Services Price Index.
Interpreting the Index
The HKP is published every month and is available on the Hong Kong Statistics Service website. It provides clear information about the change in the cost of living in the city over different periods. The easiest interpretation of the index is its percentage change from previous months or years. A positive percentage change indicates an increase in living costs while a negative percentage change indicates a decrease.
Objectives
The main objective of the HKP is to measure the cost of living in Hong Kong and to track changes in price levels. The index is used to understand the overall economic situation of the city, as well as to inform any economic decisions that policymakers may need to make. It provides a reliable gauge of the cost of living in the city and can be used to analyze the real impact of changes in taxes, government policies, currency movements, and other macroeconomic factors.
Approach
The HKP follows the Laspeyres type of index, which takes the prices of a fixed basket of goods and services at different points of time and calculates the percentage change in prices due to inflation and other factors. The base year of the index is 1989 and the base period is the third quarter of that year.
Conclusion
The HKP is an essential measure of living costs in Hong Kong and provides valuable information to policy makers, economists and citizens of the city. It can be used to compare prices across different periods, analyze the real impact of policy decisions and inform any further economic adjustments necessary to ensure that the cost of living remains affordable.
