The idea for this new inflation index originated at a lunch held almost exactly a year ago. One of the guests noted that the Hong Kong consumer price index was very low, but it did not necessarily feel like inflation was low.
His own spending patterns suggested that it was far higher than 0.2% - the CPI level recorded last December. "If you have a yuppie lifestyle, then inflation is much higher than that," he commented. "It would be a good idea to construct an inflation index based on the sorts of goods and services that reflected that lifestyle."
We readily agreed that this was a good idea - and with investment banking bonuses calculated at year end - we decided it made sense to look at a November-to-November period.
So here is the index we have created. We tried to capture the sort of items that would be typical of the investment banker's average spend, and likewise to include items that we could consistently measure over time. We also weighted the index to reflect the relative importance of the items.
It should come as no surprise, therefore, that the top weighted item is rent - in this case, the rental cost of Dynasty Court on Old Peak Road. We gave rent a 35% weighting. The next largest weighting went to schools fees (we chose to use HKIS) at 10%.
The other items ranged from luxury goods - such as Hermes ties, Krug Grand Cuvee - through high end dining (Felix), cars, petrol prices, TFT-LCDs, holidays and golf club memberships. We even included the price of a business class flight to London, bringing the number of items in the basket to 22.
While the number of items is much smaller than Hong Kong 's CPI index (which contains 97 items) we feel our index is a good (albeit not exhaustive) indicator of the rising prices of high end goods and services in the territory. A full list of items, their change in price and their weighting in the basket is set out in the table below.
So what was the result? Well, as you can probably guess, deflation is definitely dead for the average Hong Kong yuppie. Almost every component of the index saw a rise - with property rentals and club memberships (Aberdeen Marina Club) soaring. The final inflation number was 20.18%.
There is talk of record bonuses this year. Our inflation index suggests their needs to be. Once again, Hong Kong is becoming an expensive place to live the high life.
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| á | Chinnery at the Mandarin Oriental: | 2004 | 2005 | % Change: | á |
| 1 | Chablais Vaudesier, Grand Cue 2001 | 1320 | 1450 | 9.8 | 2.5 |
| 2 | MacMillian 30 Year Old (Per Glass) | 430 | 470 | 9.3 | 2.5 |
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| á | Dynasty Court: | 2004 | 2005 | % Change: | á |
| 3 | HK$psf: (rental) | 23.2 | 32.8 | 41.4 | 35 |
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| á | Olivers: | 2004 | 2005 | % Change: | á |
| 4 | Krug Grand Cuvee: (75CL) | 1,180 | 1,280 | 8.5 | 2.5 |
| 5 | Rougie Foie Gras (Goose) | 430 | 470 | 9.3 | 2.5 |
| 6 | Iranian Sevruga Cavier (250 GM) | 10,000 | 10,000 | 0 | 2.5 |
| 7 | Davidoff Grand Cru Box of 25 | 3,450 | 3,650 | 5.8 | 2.5 |
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| á | BMW 730/735LiA | 2004 | 2005 | % Change: | á |
| 8 | á | 1,150,000 | 1,220,000 | 6.1 | 7.5 |
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| á | Shell V Power Unleaded Petrol (per litre) | 2004 | 2005 | % Change: | á |
| 9 | (As of October 30) | 12.77 | 13.58 | 6.34 | 5 |
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| á | Samsung 32-Inch TFT LCD: | 2004 | 2005 | % Change: | á |
| 10 | á | 35,200 | 36,800 | 4.5 | 2.5 |
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| á | Felix | 2004 | 2005 | % Change: | á |
| 11 | Dinner for two (two courses and bottle of wine) | 1700 | 2000 | 17.6 | 5 |
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| á | (HK-London) Cathay Pacific Business Class Return Ticket: | 2004 | 2005 | % Change: | á |
| 12 | á | 42300 | 49225 | 16.4 | 7.5 |
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| á | Banyan Tree Phuket: | 2004 | 2005 | % Change: | á |
| 13 | Lagoon Pool Villa per night (Peak Season): $ | 1169 | 1013 | -13.3 | 2.5 |
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| á | Hong Kong International School: | 2004 | 2005 | % Change: | á |
| 14 | Average Annual Tuition | 118000 | 126000 | 6.8 | 10 |
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| á | Chanel No.5 Parfum (100 ml) | 2004 | 2005 | % Change: | á |
| 15 | á | 810 | 865 | 6.8 | 1 |
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| á | Louis Vuitton Speedy Bag: | 2004 | 2005 | % Change: | á |
| 16 | á | 4400 | 4650 | 5.7 | 0.5 |
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| á | Tiffany & Co. Small Platinium and Diamond Cross: (0.5 points) | 2004 | 2005 | % Change: | á |
| 17 | á | 20,000 | 20,000 | 0 | 1 |
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| á | Hermes Heavy Silk Tie | 2004 | 2005 | % Change: | á |
| 18 | á | 990 | 1090 | 10.1 | 0.5 |
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| á | Godiva 12 pack Assorted Truffles: | 2004 | 2005 | % Change: | á |
| 19 | á | 220 | 250 | 13.6 | 1 |
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| á | Debenture at Aberdeen Marina Club: (Individual Membership) | 2004 | 2005 | % Change: | á |
| 20 | á | 800,000 | 1,200,000 | 50 | 2 |
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| á | Mission Hills Shenzhen Golf Membership: | 2004 | 2005 | % Change: | á |
| 21 | Dongguan Gold Membership Joining Fee: | 550,000 | 550,000 | á | 2 |
| 22 | Dongguan Gold Membership Monthly Dues: | 1,281 | 1,281 | á | 2 |
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| á | á | á | á | á | 100 |
