Major food inflation woes still haunt Hong Kong

Even energy inflation is "heating up".

It has been noted that price pressure in Asia has been creeping up after a generally subdued 2015.

According to a research note from Standard Chartered, headline inflation in Malaysia, Taiwan and South Korea is now higher than the past-three-year average. China is also back in the ‘red’ zone for the first time since March 2012. In contrast, Indonesia, Singapore, Hong Kong, Japan and the Philippines are experiencing lower inflation.

Standard Chartered expects some of the uptrend in headline inflation to fade. Malaysia’s headline inflation should drop somewhat from April 2016 on last year’s base effect (the 6% Goods and Services Tax implemented in April last year should have had a one- off impact until March 2016).

Northeast Asia experienced unusually harsh weather in Q1, while an earthquake in Taiwan caused a temporary adverse effect on food supply. However, core inflation in these economies remains stable, even slowing in South Korea’s case.

Here's more from Standard Chartered:

Food inflation will likely remain a major concern even as it drops in the coming months. Food inflation was notably higher in China, Taiwan, Malaysia, Hong Kong and South Korea. Taiwan’s food inflation was more than 8% y/y for two consecutive months, while Malaysia’s was almost 5%.

Higher food inflation in Asia is mainly due to high prices for meat, poultry and vegetables. International food prices, while still falling on a y/y basis, are starting to bottom out. This may mean higher food inflation going forward. Food inflation is significantly lower in Japan and the Philippines.

Energy inflation data is also starting to diverge. Energy prices are still falling on a y/y basis. However, Singapore, the Philippines, South Korea and Hong Kong are ‘heating’ up as last year’s base effects wane and double-digit y/y declines narrow.

In Singapore, this is driven by policy measures and should be short-lived. Broadly speaking, the drag from headline inflation should start to ease across the region, leading to higher headline inflation than last year.