Tue, Jul 05, 2011 - Page 11 News List

Inflationary pressures to stay despite CPI: experts

WEATHER WORRIES:Barclays Capital said the weather in the south was pushing up fruit and vegetable prices, and this trend might likely continue during the second half

By Amy Su  /  Staff Reporter

While the annual growth rate of the consumer prices was not likely to have changed last month from May, an uptrend will continue in the second half of this year as inflationary pressures remain from possible rising vegetable and fruit prices and the continued global demand for bulk commodities, experts said.

The Directorate-General of Budget, Accounting and Statistics (DGBAS) is scheduled to release last month’s consumer price index (CPI) today, with the market forecasting annual growth to remain unchanged compared with May’s 1.66 percent increase.

“Last month, Taiwan’s headline inflation likely grew 1.7 percent from a year earlier, remaining stable from the previous month,” Cheng Cheng-mount (鄭貞茂), chief economist of Citigroup in Taipei, said in a research note issued on Friday.

Stable food prices and slightly lower gasoline prices were the main reasons that the CPI remained unchanged last month, Cheng said.

Recent decreases in global commodity prices would help ease inflationary pressure in the second half of this year, Cheng said. However, he added that this was unlikely to change long-term inflation.

Barclays Capital forecast that the nation’s inflation started worsening last month, with growth in headline readings likely to be more than 2 percent in the coming months on faded downward distortion from lower agricultural prices, it said in a research note yesterday.

“Last month, the weather over the agricultural regions of southern Taiwan became warmer and drier, potentially leading to rising fruit and vegetable prices, which account for 5.2 percent of the CPI basket,” Barclays said.

Given that these weather conditions might prevail in the coming months, the fruit, vegetable and rice prices would trend higher, Barclays added.

Chen Miao (陳淼), director of the macroeconomic forecasting center at the Taiwan Institute of Economic Research (台灣經濟研究院), agreed with the estimates made by Cheng and Barclays, saying that the nation’s inflationary pressures would maintain their rising pace on continuing strong demand on bulk commodities and unstable local weather conditions.

“Despite lower global commodity prices recently, we still see robust demand, which would continue to drive up prices in the second half of this year,” Chen said by telephone yesterday.

The price of fresh fruit might also remain high in the coming months and push up inflationary pressures, offsetting the effect of stable vegetable prices, Chen added.

The government forecast a 2 percent growth in inflation this year. In the first five months, the nation’s headline inflation indicator increased 1.36 percent from a year earlier, DGBAS data showed.

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