Tue, Sep 06, 2005 - Page 10 News List

CPI reaches 7-year high on food prices

HIGHER EXPENSES Two strong typhoons in succession caused such damage to crops that food prices soared -- which in turn caused the consumer price index to rise 3.56%

By Amber Chung  /  STAFF REPORTER

Taiwan's consumer price index (CPI) last month continued to climb for the sixth straight month, reaching a seven-year high driven by rising food costs after two typhoons in succession damaged crops in the past two months, the statistics bureau said yesterday.

The CPI hike last month rose by 3.56 percent from a year ago, mainly brought by increasing food expenses that soared by 11.33 percent year-on-year, Wu Chung-ming (吳昭明), a division chief at the Directorate General of Budget, Accounting and Statistics (DGBAS), told a media briefing yesterday.

Prices of vegetables, fruit, meat and eggs escalated, as two typhoons hit Taiwan last month right after Typhoon Haitang that caused a severe agricultural loss of NT$3.6 billion in July, compared with a loss of NT$3.1 billion last year, Wu said.

High fuel costs also contributed to price hikes with an increase of 11.71 percent from a year ago, driven by skyrocketing global oil prices, Wu said.

A 10 percent markup in the retail gasoline price is expected to raise the CPI by 0.39 percent, according to the DGBAS' calculations.

Meanwhile, state-run Chinese Petroleum Corp (CPC, 中油) said yesterday that it would follow government policy and did not plan to raise gasoline prices for the time being to reflect its growing costs amid rising crude oil prices.

CPC's smaller rival Formosa Petrochemical Corp (台塑石化) announced a 10 percent hike in wholesale fuel prices last Wednesday, which added an extra NT$2.4 per liter to gasoline products and NT$2 per liter to diesel oil products.

"Consumer prices last month soared beyond our expectations ... which could indeed result in inflationary pressure," said Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup in Taipei.

Citigroup originally expected the CPI to grow by around 2.4 percent to 2.5 percent last month alone, 1 percent less than the DGBAS figure, and to rise by about 2 percent this year. But it may raise its projection for this year if the index continues to jump by over 3 percent next month, Cheng said.

Moreover, the central bank is expected to keep a tight monetary policy by raising its benchmark interest rates by 0.125 percentage points -- in an effort to combat looming inflation -- for the fifth straight quarter in its quarterly meeting to be held at the end of this month, the economist said.

From January to August, the nation's CPI rose by 2.13 percent compared with the corresponding period last year, the DGBAS said. The DGBAS just last month raised its forecast to 1.97 percent from the 1.7 percent forecast in May.

"We are not considering adjusting our prediction upward now, as food prices may go down in the fourth quarter, a traditional mass-production season for vegetables," Wu said.

He conceded, however, that the index could rise above the 2 percent level if crude oil prices keep escalating and therefore impact the nation's fuel prices in the future.

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