Fri, Sep 04, 2009 - Page 12 News List

Analysts expect easing deflationary pressures

By Crystal Hsu  /  STAFF REPORTER

Deflationary pressures appear to have substantially eased with Typhoon Morakot driving up food costs and given a lower base of comparison last year, analysts said yesterday.

The consumer price index (CPI) contracted 2.33 percent in July, its lowest level since 1970, as the economic downturn curbed demand and commodity prices.

The Directorate-General of Budget, Accounting and Statistics is due to release last month’s inflation data on Monday, with several economists forecasting that the CPI could improve to between zero and 1.02 percent compared with the same month last year.

Tony Phoo (符銘財), chief economist at Standard Chartered Bank, said the inflationary reading was likely to have returned to neutral territory after the typhoon wreaked havoc on food supply, while demand picked up during the Lunar Ghost Month, which falls between Aug. 20 and Sept. 18 this year.

“Vegetable, fruit, meat and fish prices shot up significantly in the wake of Morakot,” Phoo said by telephone. “The disaster lifted the specter of deflation earlier than expected.”

Food prices, which account for about 25 percent of the CPI basket, rose sharply in the first seven months of last year on surging international crude oil and raw material prices, but slowed afterward because of the economic downturn.

The lower base last year would help offset deflationary risks this year and no longer pose a threat to the economy, Phoo said, while warning that the public should brace for inflationary pressure caused by easy monetary measures around the world.

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