INFLATION continued to ease in February, dropping by more than economists expected as falling food and oil prices pushed costs downwards.
The consumer price index fell by 0.5 per cent over January, marking the fourth consecutive decline and establishing a clear pattern of disinflation, or decreasing inflation.
Food prices fell 0.6 per cent due to cheaper seafood, fresh vegetables, pork and cooked food. Housing costs dropped 0.5 per cent largely because of lower gas tariffs.
As the prices of travel and holidays eased, recreation costs also dipped by 1.2 per cent.
But economists were careful to distinguish the current trend of disinflation from the more worrying pattern of deflation.
They said the threat of deflation, in which prices and wages spiral persistently downwards in a destructive cycle, is still some way off - assuming it materialises at all.
On a year-on-year basis, consumer prices remained 1.9 per cent higher last month than a year ago, due mainly to higher costs of housing, food, healthcare and recreation.
Housing prices were still 6.6 per cent more than the previous year, while food costs were 4.3 per cent higher.
As the disinflation gathers pace, however, year-on-year inflation could soon turn negative in a few months, said HSBC economist Robert Prior-Wandesforde.
But this may not mean deflation either, as it would likely 'reflect the impact of collapsing commodity prices rather than the effects of persistently weak domestic demand', he explained.
