Tue, Aug 07, 2007 - Page 12 News List

Consumer prices down 0.34 percent on food cost drop

BLOOMBERG AND CNA , TAIPEI

Taiwan's consumer prices unexpectedly fell last month, led by a drop in food costs.

Prices declined 0.34 percent from a year earlier, the state statistics bureau said yesterday in Taipei, below the median estimate for a 0.3 percent gain in a Bloomberg News survey of 15 economists.

Prices rose 0.11 percent in June.

Food prices were lower than last year when two typhoons cut agricultural production, sending food costs higher, the Directorate General of Budget, Acounting and Statistics said.

Price pressures could build in the second half as the cost of imported goods increases and spending gathers pace.

"If you take out food items, you still have most of the index's components pointing up in July," said Cheng Cheng-mount (鄭貞茂), chief economist at Citibank Taiwan Ltd. "We stand by our view that the central bank will probably go for another quarter-point increase in September to keep inflation in check."

The cost of food fell 4.79 percent last month after a 3.15 percent drop in June. Food accounts for 25 percent of the total consumer price index (CPI).

"Without food prices, CPI would have been up 1.34 percent from a year earlier," the statistics agency said in a statement.

Healthcare increased 5.04 percent from a year ago and housing climbed 1.06 percent.

Core consumer prices, which exclude food and energy, rose 1.11 percent last month from a year earlier after climbing 0.93 percent in June. Import prices climbed 5.87 percent last month from a year earlier, the report showed.

Central bank policymakers in June raised the benchmark interest rate by a higher-than-expected quarter percentage point to 3.125 percent to stem a flow of funds leaving the country and ward off inflation. Rising prices of raw materials and commodities are pushing up costs for producers.

Wholesale prices, which measures prices paid by producers, combined with export and import prices, rose 4.02 percent last month, the 21th straight gain.

The government forecasts consumer-price inflation will accelerate to 1.9 percent in the third quarter and 2 percent in the final three months of this year.

Crown Plastic Enterprise Co (皇冠塑膠) and Tah Hsin Industrial Co ( 達新工業), makers of waterproof garments and shoes, will raise prices to reflect commodity costs, the Chinese-language Commercial Times reported on July 31, without citing anyone.

Meanwhile, data released yesterday by the Taipei City Department of Budget, Accounting and Statistics (DBAS) showed that the city's CPI last month had increased 0.17 percent over the level posted in June

The figure represented an increase of 0.19 percent over the level for the same month last year, DBAS officials said.

DBAS officials attributed the rise mainly to soaring international oil prices and increases in the cost of travel overseas.

Prices in the service sector increased by an average of 0.82 percent over the June level and by 1.36 percent year-on-year, while prices of commercial goods declined by 0.54 percent from the June level and by 1.06 percent year-on-year, city officials said.

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