Wed, Jun 06, 2012 - Page 12 News List

Food prices rise, but CPI below 2%

INFLATION:Vegetable prices increased by 25.35% from a year ago because rainy weather cut supplies, and partly because of a low comparison base from last year

By Amy Su  /  Staff reporter

Lowering telecoms and Internet subscription costs helped offset the negative inflationary impact of rising food prices, ensuring that annual increases in the consumer price index (CPI) remained below 2 percent last month, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.

Headline inflation expanded 1.74 percent last month from a year earlier, following a 1.44 percent increase in April, with food costs increasing 3.75 percent — the highest of the seven main sectors surveyed by the DGBAS.

Vegetables increased by a significant 25.35 percent last month from a year ago as continuous rainy weather cut supplies and drove up costs, DGBAS said in its monthly report. It also reported that fruit prices rose 3.48 percent.

“The good weather conditions and abundant supplies during the same period last year dragged down prices for vegetable and fruit and built up a lower comparison for this year, further expanding these products’ rising level last month,” DGBAS section chief Wang Shu-chuan (王淑娟) told a press conference.

Expenses for eating out expanded by 2.38 percent last month from a year earlier, marking the highest rise seen since March 2009.

Wang said restaurants and food stands usually imposed relatively high-level price hikes in one-off increases to compensate for rising costs in rent, raw materials and human resources.

However, Wang did not say whether the rising costs might also be attributable to the government’s recent move to hike energy prices.

Lower telecoms and Internet costs, on the other hand, helped slow increases in the CPI and offset the impact from food sector cost jumps, Wang said.

Telecoms and Internet connection prices tumbled 10.15 percent last month from last year, dragging down the annual increase in last month’s CPI by 0.28 percentage points, DGBAS statistics showed.

“Without the lower prices of telecoms and Internet expenses, the annual growth in CPI would have climbed over 2 percent last month,” Wang said.

Despite the risk that the government’s electricity tariff hike may add to inflationary forces, the central bank will probably not raise Taiwan’s policy rates at its board meeting on June 21, a foreign brokerage house said yesterday.

“We are no longer looking for the central bank to hike the rates in June’s policy meeting given the heightened uncertainty surrounding developments in Europe,” Barclays Capital said in a research note.

The global investment bank added that the government’s recent cut to its full-year CPI growth forecast would further strengthen the central bank’s resolve in holding rates at their current levels. The DGBAS lowered the inflation forecast this year to 1.8 percent last month, from its 1.9 percent estimate in April.

The wholesale price index dropped 0.64 percent year-on-year last month, its third straight month of decline, which may further ease pressure on consumer prices and help to slow down inflation generally, DGBAS data showed.

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