Pace of inflation the fastest since 1995

An economist described the headline CPI figure for July as “pretty scary”.

According to the Composite Consumer Price Index, overall consumer prices rose by 7.9% in July 2011 over the same month in 2010, larger than the corresponding increase of 5.6% in June of this year.

Meanwhile a Bloomberg report noted, “Hong Kong’s economy will shrink again this quarter after a contraction in the three months through June that was caused by an export slowdown, Morgan Stanley and Daiwa Capital Markets say. Wage increases may add to pressure on companies’ profit margins as businesses including McDonald’s Corp report that they are already grappling with increased rent and material costs.”

Daiwa’s Kevin Lai was quoted as saying, “The higher business costs and rising expectations for wage gains may force some companies to close and hasten the recession.”

View the report here.