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Cabinet revises inflation forecast slightly upwards

The Cabinet revised upward the nation's annual inflation forecast to 3.5 percent yesterday, from its previous projection of 3.29 percent made in May, amid rising energy and commodities prices worldwide.

Albert Lin (林清修), a deputy minister at the Government Information Office, said the upward adjustment in the consumer price index (CPI) was made at a routine meeting of a Cabinet-level task force on commodity price stabilization convened by Vice Premier Paul Chiu (邱正雄).

Lin attributed the adjustment to the higher-than-expected surge in international oil prices and in international raw material prices.

“We hoped to keep the annual consumer price index this year at 3.5 percent,” he said.

PEAK

Officials from the Ministry of Economic Affairs said the inflation rate could peak at 5.3 percent this month, based on a projection by Global Insight Inc, a forecasting firm.

Earlier this month, the Directorate General of Budget, Accounting and Statistics reported that inflation had risen 4.19 percent year-on-year in the second quarter, following a 4.97 percent rise in the CPI last month, the second highest in 12 years.

To contain inflation, the Cabinet also approved a proposal by the Ministry of Finance to slash by half the tariff rates of soy beans, sesame, butter, cheese, and tomato paste for half a year between Aug. 6 to Feb. 5.

The Cabinet’s revised inflation forecast came after the latest domestic trade statistics released by the Ministry of Economic Affairs on Tuesday showed that rising fuel and commodities prices had taken a toll on the nation’s retail sector last month.

RETAIL

With consumers currently struggling with inflation and a fall in real wages, companies in the retail sector registered a negative 0.4 percent growth figuresin sales last month year-on-year to NT$266.8 billion (US$8.78 billion), marking the first negative sales growth for this sector since October 2006, the ministry said in a report on its Web site.

Last month’s sales in the retail sector also reflected a drop of 2.68 percent from the previous month, ministry tallies showed.

The ministry attributed the retail sector’s negative sales growth last month mainly to a decline of 24 percent in sales of automobiles and motorcycles (including parts and components) last month from the previous year.

Overall, total revenues earned by all local companies in the wholesale, retail and restaurant sectors rose 6 percent to NT$1.04 trillion last month from a year earlier, after a rise of 8 percent to NT$1.05 trillion in the previous month, ministry data showed.

In the first six months of the year, the three sectors saw revenues increase 8.63 percent to NT$6.21 trillion in nominal terms from the previous year, but the ministry said the figure in real terms (excluding retail price rises due to inflation) would reflect a negative 2.29 percent growth from the same period of last year.
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