With private consumption lethargic and excessive savings expected to hit a two-decade high next year, the chief government economic planner is to talk with retailers this week to gain a better grasp of why consumers refuse to spend.
On Friday, Council for Economic Planning and Development Chairman Chen Tian-jy (陳添枝) telephoned General Chamber of Commerce (全國商業總會) chairman Chang Ping-chao (張平沼), asking him to arrange meetings with grocers and retailers this week to help the council find remedies to reverse slumping consumer confidence.
The Directorate-General of Budget, Accounting and Statistics (DGBAS) recently lowered the GDP growth forecast for the second quarter from 4.57 percent to 4.32 percent and attributed the trim mainly to weaker-than-expected domestic demand.
Domestic demand posted a decline of 1.72 percent between April and June, sinking GDP by 1.46 percentage points, the DGBAS report showed. Food spending reported a drop of 1.87 percent, while private investment and capital equipment imports fell 9.37 percent and 12.7 percent respectively, the report said.
Chang told reporters he would try his best to arrange the meetings before Thursday.
Chen’s move marked yet another government effort to pull the economy out of the doldrums after cyclical business indicators flashed a slowdown signal in July with withering domestic demand blamed for the trend.
A report by the Ministry of Economic Affairs released on Aug. 22 showed that the retail sector suffered a 3.81 percent decline in business volume year-on-year last month, and the drop is expected to deepen in the coming months on sustained inflationary pressures.
Norman Yin (殷乃平), a professor of money and banking at National Chengchi University, said consumers would continue to refrain from spending as long as their incomes remain unchanged and commodity prices keep rising.
Yin predicted that the inflation rate would exceed 4 percent this year although the DGBAS put the figure at 3.74 percent.
The sense of insecurity has prompted people to keep their money in the bank. The DGBAS projected that the national savings rate would reach 30.6 percent next year while the excess savings rate would hit NT$1.3 trillion (US$41.3 billion), a ratio of 9.5 percent to GDP, both the highest since 1989.
Excess savings have hit NT$1.1 trillion, or a rate of 8.5 percent, this year, based on the DGBAS data, which has prompted the central bank to use public market operations and various instruments to absorb this huge glut of idle funds from the money markets.
Economists have said that the key to resolving the problem of excess savings is how the government boosts domestic investment and private consumption.
This has become a more urgent task for Taiwan in the second half of the year as the country is facing weakening demand of its exports because of the global slowdown. The government’s latest data showed on Aug. 25 that export orders grew 5.52 percent year-on-year in July and marked the slowest pace since May 2003.
Kevin Hsiao (蕭正義), head of UBS Wealth Management Research in Taiwan, said it is unhealthy for an economy to draw its growth from exports alone as that makes it susceptible to external influences.
“Heavy dependence on exports leaves Taiwan ill equipped in coping with surging fuel and raw material costs that are eroding corporate profits and the nation’s economic performance,” Hsiao said.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure