Tue, May 08, 2012 - Page 12 News List

DGBAS warns of price change fallout

LONGER-LASTING:An official said that the staggered introduction of electricity price increases could delay the full impact of the increase on consumer prices until next year

By Amy Su  /  Staff reporter

The government’s decision to stagger the introduction of an increase in electricity prices could delay and extend some of the pressure on consumer prices into next year, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.

The DGBAS’ warning came after the agency announced yesterday that year-on-year growth in the consumer price index (CPI) was 1.44 percent last month, compared with a revised 1.25 percent increase in March.

“The increasing cost of fuel was one of the major factors pushing up the annual growth of the CPI,” DGBAS section chief Wang Shu-chuan (王淑娟) told a press conference.

Fuel costs rose 6.32 percent last month from a year earlier — contributing 0.24 percentage points to the 1.44 percent growth in the CPI — following the government’s -decision to scrap restrictions on fuel price increases, Wang said.

The increasing prices of vegetables, overseas group travel and clothing also pushed up growth in the headline inflation index last month, the DGBAS said in a report.

The price of vegetable increased by an average of 15 percent last month from a year earlier as a result of continuous heavy rain, which cut supplies and drove up costs, while clothing prices rose 5.92 percent, the DGBAS said.

Now that the government is planning to phase in the increase in electricity prices in three stages instead of the original plan to introduce the full increase in one go, the impact on consumer prices for this year will be lower, Wang said.

“The new plan [for the electricity price increase] is expected to raise headline inflation by 0.18 percentage points this year, compared with a 0.46 percentage point impact expected as part of the original plan,” she said.

However, Wang said the new plan could also delay part of the impact on consumer prices until next year and thereby exacerbate upward price pressure, following the second price increase, which is scheduled to take effect on Dec. 10.

Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank, said in a note yesterday that although the annual growth in the CPI was higher than expected, the data suggests that the central bank would be in no hurry to raise its policy interest rates during its next quarterly board meeting next month.

Standard Chartered forecast 1.35 percent year-on-year growth in headline inflation for last month, while a market consensus forecast 1.41 percent.

However, Phoo said he expected the initial increase in electricity prices to push core inflation higher in the second half of the year.

Core inflation grew just 0.92 percent year-on-year last month, picking up slightly from the 0.7 percent increase posted a month earlier, DGBAS data showed.

Meanwhile, the wholesale price index fell 0.55 percent year-on-year last month, slowing further from the 0.24 percent annual drop in the previous month, the agency said.

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