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Consumer prices fall 0.2% as shops clear summer stock

Taiwan consumer prices fell in September as shops cleared out excess summer clothing stock ahead of winter.

The consumer price index fell a seasonally adjusted 0.2 percent from August after climbing 0.2 percent the previous month, the Directorate General of Budget, Accounting and Statistics said.

From a year earlier, prices fell 0.5 percent.

An economic contraction in the second quarter and record unemployment in August have dented consumer confidence. The US terrorist attacks on Sept. 11 and two typhoons in Taiwan in the second half of the month further eroded confidence.

"With a deeper recession in the US almost certain now, recessionary expectations in Taiwan will be even more entrenched," said Daryl Goh, an economist at SG Securities (HK) Ltd.

"As they become more entrenched, deflationary expectations will build."

The government, which forecast in August the economy would shrink 0.4 percent this year, now expects it to slide as much as 2 percent as the terrorist attacks curb demand for mobile phones and semiconductors in the US, Taiwan's biggest export market.

Bad weather is compounding Taiwan's economic troubles, interrupting factory production and damaging property. Typhoon Nari struck the island on Sept. 16, causing an estimated NT$5.8 billion (US$191 million) in damage to crops, buildings and vehicles.

Typhoon Lekima clipped southern Taiwan a week later, bringing more floods and landslides and closing businesses.

Falling Rates Inflation below 1 percent this year has allowed Taiwan's central bank to cut interest rates 10 times since December as it tries to spur lending and investment. The bank last cut rates a quarter percentage point to a record-low 2.5 percent on Wednesday.

With unemployment at a record high and the nation's key stock market down 60 percent since President Chen Shui-bian (陳水扁) took office in May 2000, the central bank may need to trim rates further to encourage consumers and businesses to spend.

Economists expect the key rate to fall to 2.25 percent by year-end.

Food costs, which make up about one-quarter of the consumer price index, rose 2.1 percent in September from a month earlier.

Clothing prices dropped 1.6 percent as retailers slashed prices to attract cost-conscious customers and clear stock.

The wholesale price index fell 0.4 percent from a month earlier and declined 1.4 percent from a year earlier, the report showed.

However, the September consumer price index was 0.42 percent higher from that of August, due mainly to higher vegetable and fruit prices after Typhoon Nari and Lekima, according to DGBAS statistics.

The fall of the September whosale price index was due mainly to the slower demand and falling prices of raw materials, the directorate said.

In the first nine months of this year, the nation's consumer price index registered a year-on-year growth of 0.2 percent, the DGBAS figures showed.
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