Hong Kong's annual inflation slowed to the lowest level in two years in July, and was far below expectations, data released by the Census and Statistics Department showed Tuesday.

The overall consumer price index increased 1.6 percent annually in July, significantly slower than the 3.7 percent gain seen in June. Economists had forecast inflation to ease to 3.4 percent. The latest figure was the lowest since July 2010, when prices rose 1.3 percent.

Food prices climbed 5.9 percent annually, while housing costs decreased 2.2 percent during the month. Clothing and footwear prices were higher by 2.4 percent compared to July 2011, and transportation costs by 2.3 percent.

Netting out the effects of all Government's one-off relief measures, the composite index increased 4.2 percent, following June's 4.5 percent rise.

In the three months ended July, on a seasonally adjusted basis consumer prices decreased on average 0.7 percent from the preceding three-month period.

The agency said that given the more difficult economic environment as well as the deceleration of import prices, inflation is likely to recede further in the coming months.

RTTNews