Hong Kong's inflation inched higher to 4%

Here's what to blame.

According to DBS, the CPI for April came in at 4.0% YoY, much higher than 3.6% in March. Component wise, overall food inflation jumped 5.2% from 3.7% in March, mainly due to a rebound in the prices of fresh vegetables (no wonder that food inflation for meals at home rose even more, by 6.5%).

Here's more:

Housing inflation has increased to 5.9% from 5.2% in March despite the 2.9% cumulative fall in residential property prices aftertwo rounds of government intervention in October 2012 and February 2013. Clampdowns on the property market have encouraged some potential buyers to rent forthe time being, thereby supporting rents.

Private residential rents fell only mildly (HK$22.8/sqftin April versus $22.9/sqftin March) after rising for 12 monthsstraight, butstill are still up 16.9% YoY. Upward revision in the minimum wage to $30 per hour from $28 effective from May 1 will add furtherinflationary risksin the months ahead.

Meanwhile, the seasonally-adjusted unemployment rate stayed at 3.5% in April,same as that in March, meaning the economy is still nearfull-employment.

In theory, the influx of graduates into the labor market will put pressure on the unemployment rate in May/June, but this has not been happening in the past two years. The bottom line is that, barring external systematic shocks, Hong Kong’s labor marketis expected to stay tight forthe remainder ofthe year.