LUNAR NEW YEAR 52
Unwelcome tradition Higher retail prices are the least enjoyable feature of the Spring Festival
T
he Lunar New Year holiday is full of meaningful rituals. One that all families dislike is the seasonal increase in prices for the most sought-after goods and services. Are these short-term increases unavoidable or a case of businesses taking advantage of the festival to earn an extra buck? Macau-based economists say it all comes down to basic economics: demand outstrips supply and prices are pushed up. “Usually, prices in the Chinese New Year period increase for a short period. But this year prices are already too high, so the percentage of the increase will not be as high as before,” says Macau Association of Economic Sciences chairman Joey Lao Chi Ngai. Mr Lao says it is difficult to estimate this year’s price increases. Food and beverage outlets mark up prices during the Spring Festival to cover additional operating expenses. Their increased costs include paying higher wages. Under Macau law, employees are entitled to seek up to three times their normal salary for the first three days of the festival as these are statutory holidays. The holiday this year starts on February 10. “It’s the usual practice of restaurants to amend their price strategy for Chinese New Year,” Mr Lao says. Several food and beverage outlets do so by adding a surcharge to the bill that can be as high as 20 percent of the cost of the meal during the first three days of the Lunar New Year. Economist Albano Martins agrees that demand during the festive season rises as residents consume more and there is a surge in visitors. “Some retailers take advantage and adjust their prices up,” says Mr Martins. But the increase also often starts with wholesalers. Nam Yue Food Stuff and Aquatics Co Ltd, one of the city’s two main suppliers of fresh meat, has already warned that wholesale prices FEBRUARY 2013
for imported fresh beef and pork will rise this month. The company says this is because mainland producers will be unable to cope with rising demand during the holiday period. Nam Yue says interruptions to supply chains during winter further push up prices.
Costly oranges
Last year, the Spring Festival fell on January 23. Data from the Statistics and Census Service shows prices were 0.93 percent higher in January than the month before. It was the highest monthly jump in inflation last year. In contrast, prices fell in February, which was the only month-on-month drop recorded in 2012. Last year’s January increase in inflation was fuelled by doubledigit increases in the price of fresh seafood, outbound package tours, and hairdressing and grooming services. The price of oranges, traditional gifts displayed as part of the festival’s traditions, rose by 5 percent. The head of the Economic Services
Bureau, Sou Tim Peng, who is also part of a government taskforce to help stabilise food prices, says there is no indication of price manipulation in Macau, despite sharp seasonal increases. As the prices for fresh meat rise, residents are turning to frozen pork and beef, a trend expected to continue during the Spring Festival. Official data shows that imports of frozen meat rose by more than 20 percent last year over 2011’s import volumes. Fresh meat is mostly sourced from the mainland but frozen meat reaches Macau from all around the world, with a broader range of suppliers helping to keep prices steady. The good news is that after the Lunar New Year holiday, price increases are expected to slow. Mr Martins has forecast that fullyear inflation will be between four and five percent. Mr Lao is more bullish and expects a lower inflation rate of between three and four percent. Last year, inflation stood at 6.1 percent.