Inflation is an overall rise in the price of goods and services in an economy, leading to the fall in purchasing power of money. Macao’s annual inflation, as measured by the composite consumer price index, rose 0.95% YoY (year-over-year) in May 2017, higher than the 0.8% increase seen in April.
Macao’s inflation has been increasing since February 2017, when the rate reached a low of 0.37%, according to Statistics and Census Service data. Prior to that, inflation had been following a declining trend since February 2016, when it touched a high of 3.9%.
The growth in the inflation rate was due to an increase in food, beverage, education, and health prices. The breakdown of different segments and changes in their prices were as follows:
- food and beverages accounted for 29% of the index and rose 1.6% YoY
- health accounted for 3% and rose 5.1% YoY
- education accounted for 2.9% and rose 7.5% YoY
- transport accounted for 11% and rose 2.4%
- household appliances accounted for 3.3% and rose 1.9%
- miscellaneous goods accounted for 9% and rose 1.5%
- recreation and culture accounted for 4.8% and rose 1.4%
- clothing and footwear accounted for 6.5% and rose 0.12%
- communication accounted for 2.5% and fell 2%
As of May 2017, Macao’s composite consumer price index had risen year-to-date, by an average of 0.92% YoY.
Rising inflation is negative for the economy as it reduces consumers’ purchasing power. In turn, consumers’ spending capacity is reduced, which is bad news for casinos such as Las Vegas Sands (LVS), MGM Resorts (MGM), Wynn Resorts (WYNN), and Melco Resorts & Entertainment (MLCO). Investors can gain exposure to casino stocks by investing in the PowerShares Dynamic Leisure and Entertainment Portfolio ETF (PEJ), which invests 8.3% of its portfolio in casinos.