Hong Kong's consumer price index (CPI) rose 1.3 percent on a yearly basis in April, compared with a 2.4 percent increase in March.

The decline demonstrates that the city's inflation pressure has eased and sooths fears that Hong Kong's economy is on shaky ground.

A spokesperson from the government said the drop is the result of a series of rate concessions given by the government in its latest budget report.

In April, year-on-year price increases were recorded for food, clothing and footwear, miscellaneous services, miscellaneous goods, meals and alcoholic drinks and tobacco.

Meanwhile, year-on-year declines in prices were recorded for durable goods, electricity, gas and water and transport.

HSBC economist George Leung Siu-kay said he expects inflation to stand at 1.8 percent for the year, 1.5 percent higher than government's forecast.

"In view of increasing salaries, rents and imported goods, CPI will face ascending pressure. However, we believe the CPI could stay at a low level," he said.

Citibank chief economist Law Lim-cho pointed out that inflation would continue to rise when rate concessions are no longer in force. But he added: "The surge of CPI will not ruin the Hong Kong economy in the short run."

Daniel Chan, a senior investment strategist at DBS Bank (HK), said the rising yuan would push up the price of imported goods and that the CPI is likely to climb to 3 percent by the end of the year. He said food would be the most affected category.

He Guangbei, vice-chairman of Bank of China (Hong Kong), said that Hong Kong is under the threat of inflation given the yuan's appreciation, but it should only have a minor effect on the economy.

Source: China Daily