The prices of products and services are generally raised. There have been weighty increases of rents and food prices (China Daily, 2011).
It was measured that year-on-year increases in prices in January 2013 for housing and foodstuff were 5. 0% and 7. 2% respectively (Fontes, 2013).
These two expenses are essential for most people’s living; their upsurge burdens the citizens financially in a great sense. Unfortunately, the growth in wages cannot catch up with the accelerating inflation rate. It is stated that inflation nullified more than 50% of the income increases’ value in September 2011 (Hong Kong Business, 2012).
Hong Kong people have to suffer from a heavier monetary burden as the general prices for living goes up while there is no extra money to offset the pressure. Their standard of living is actually degraded. Another effect that soaring inflation brings is the damage to the small and medium-sized enterprises (SMEs).
As inflation rate keeps standing high, the SMEs in Hong Kong are unfavorably affected. Farhoomand (2005) points out that SMEs are extremely vulnerable to external factors as they do not have enough resources to cushion themselves from the constantly changing environment.
Most Hong Kong SMEs make little profit margin, which is only about 5% to 6% (Li, 2010).
Due to mounting inflation, the production cost is increased as the raw material costs inflate drastically. Escalating expenses like rentals and wages also give rise to the overall operating costs. These increases in various costs lead to an even smaller profit making for the business owners. It is not positive that they will be able to afford or continue the business as the flexibility to cut cost is reduced (Mitchell, 2009).
The Review on Inflation and Consumer Price Indices
A literature Review5 Methodology6 Statement Of The Problem6 Objectives Of The Study10 Summary and Conclusions10 Abstract Consumer price index has been confused by a lot of people in recent times. CPI, which is one of the most frequently used statistics to identify periods of inflation is also sometimes viewed as an indicator of the effectiveness of government economic policy. The government, ...
Most of the time, people tend to quit the business when they cannot make profit. The SMEs in Hong Kong would be less competitive compared with other countries and regions as its size starts to diminish. Inflation leads to a worrying outlook of SMEs in Hong Kong. On the whole, inflation pressurizes and brings negative effects to the society and the people in Hong Kong. Hong Kong citizens are burdened with higher cost of living as prices of products and services keep surging while the raised income cannot cover the depreciation of the currency.
