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Consumer Price Index contracted 1.84% last month

“We see little risk that inflation would spiral out of control.” — Tony Phoo, Standard Chartered Bank (Taiwan), chief economist

The consumer price index (CPI) contracted 1.84 percent year-on-year last month as retailers cut prices to boost demand while consumption remained weak amid the economic slowdown, the ­Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.

The agency dismissed deflationary pressure, saying the inflationary gauge advanced slowly on a monthly basis this year, from 104.43 points in January to 105.92 points in October.

“Food costs dropped a yearly 4.49 percent last month, edging down the overall index by 1.31 percentage points,” DGBAS section chief Wu Chao-ming (吳昭明) told a media briefing.

Vegetable and fruit prices surged in October last year following Typhoon Jangmi, he said.

Entertainment and education costs declined 3.06 percent, pulling down the inflationary reading by another 0.5 percentage points, Wu said, linking the trend to price cuts by consumer electronics retailers to promote sales.

Transport costs fell 0.86 percent because of lower car prices and telecommunication rates, while fuel costs picked up slightly from last year’s level, the report said.

The core CPI — used to track long-term inflation by excluding energy, vegetables and other volatile-priced commodities — declined 0.85 percent, the report said.

The government’s report of a 1.84 percent decline in CPI last month was lower than Standard Chartered Bank (Taiwan) Ltd’s ­forecast of a 0.5 percent fall.

“Apparently, the up-tick in transportation costs — the result of rising retail fuel prices — failed to match the decline in food prices, especially fruits and vegetables,” the bank’s chief economist Tony Phoo (符銘財) said yesterday.

Phoo said the inflation reading might return to positive territory beginning either this month or next month, although that could be partly due to last year’s lower base.

“Still, we see little risk that inflation would spiral out of control,” he said, citing such reasons as negative wage growth and a record jobless rate.

As a result, Standard Chartered is sticking to its previous forecast that the central bank will not change its monetary policy at its quarterly board meeting on Dec. 9 and will keep its benchmark policy rate unchanged at a record low 1.25 percent, the economist said.

The DGBAS also reported the wholesale price index (WPI) dropped 6.23 percent year-on-year last month, although international metals and some raw materials saw sharp price hikes from a month earlier.

Wu said domestic wholesalers will bear the brunt of the rising prices and it will take a while to impact retailers and consumers.

For the first 10 months, consumer prices fell 0.85 percent, while the core CPI remained level and the WPI declined 10.91 percent, the report said.
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