Consumer prices jumped 5.92 percent year-on-year last month, the highest level in nearly 14 years, driven primarily by rising food and fuel costs, the Directorate General of Budget, Accounting and Statistics (DGBAS) said in a report yesterday.
The number is likely to climb higher next month because the nation’s inflation rate normally peaks in the summer, the agency said.
“The consumer price index rose 5.92 percent in July compared with the same period last year,” DGBAS section chief Wu Chao-ming (吳昭明) told a media briefing. “All seven categories posted price hikes, with food costs reporting the biggest increase of 13.61 percent.”
Wu said the latest CPI index was the highest since September 1994 when inflation hit 6.69 percent, but GDP growth and nominal wages both accelerated at a quicker pace.
“We attributed the flaring inflationary pressure to soaring fuel and raw material prices but the two storms last month were also to blame,” he said.
“Vegetable and fruit prices rose sharply in the wake of Tropical Storm Kalmaegi and Typhoon Fung-wong,” Wu said. “The costs have subsided this month and may remain stable without more natural disasters.”
Soaring inflation, which already has taken a toll on people’s income, is expected to dampen economic growth for this year.
The DGBAS is scheduled to publish its new yearly GDP growth and CPI forecasts later this month. It previously put the GDP growth rate at 4.78 percent and the CPI at 3.35 percent.
Norman Yin (殷乃平), a professor of money and banking at National Chengchi University, said the annual CPI figure is likely to be more than 4 percent. The CPI stood at 4.97 percent in Ju ne and averaged 4.18 percent between January and July, the DGBAS report showed.
“When oil prices rise 1 percent, the GDP is expected to drop 0.2 percent,” Yin said by telephone yesterday.
He said the service sector might slash wages or downsize to cope with inflation.
Meanwhile, the wholesale price index climbed 11.49 percent from a year ago. The index gained 8.81 percent between January and last month. The core CPI, which excluded vegetable, fruit and fuel costs, reached 3.21 percent.
The DGBAS said the inflation indexes are likely to rise this month but drop in the fall, based on previous years.
Tine Olsen, a Sydney-based economist at the Moody’s Economy.com Web site, said the latest inflation data would prompt the central bank to hike interest rates again to contain inflation.
“At least we are likely to see more interest rate increases, which will repress domestic consumption and pose a threat to the overall activity of the Taiwanese economy,” she wrote in an e-mailed statement yesterday.
But Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup Inc in Taiwan, said he believed “inflation has peaked and will gradually ease in coming months.”
“We call for another 12.5 basis points rate hike in September. But at the same time, slowing growth momentum in the second half of 2008 will likely cause the central bank to end its tightening earlier,” Cheng wrote in a client note released yesterday.
Additional reporting by Kevin Chen
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