Tue, Mar 10, 2015 - Page 13 News List

Headline consumer price index falls

By Crystal Hsu  /  Staff reporter

The consumer price index (CPI) contracted 0.19 percent last month from a year earlier, dragged down by cheaper fuel prices and electricity rebates, though the food and entertainment industries were boosted by the Lunar New Year holiday, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said in a report yesterday.

The inflationary gauge logged negative growth for the second consecutive month, but analysts dismissed worries over deflation, saying that private consumption remained healthy and might accelerate due to energy and transportation cost savings.

“Of greater significance is that the core CPI [consumer price index] — which the central bank tracks closely and indicates underlying price pressure — rebounded to 1.78 percent last month, after slipping to 0.64 percent in January,” Standard Chartered Bank senior economist Tony Phoo (符銘財) said in a note.

This is the fastest core CPI increase since February, 2013, and shows that the underlying price pressure remains a concern, Phoo said.

Fuel prices fell by 28.11 percent last month, while electricity costs plunged 24.72 percent, the DGBAS said.

State-run utility Taiwan Power Co (Taipower, 台電) last month passed on cost savings from lower oil prices with electricity rebates to households.

The rebate trimmed 0.59 percentage points from the headline CPI, the DGBAS said, adding that electricity rebates and lower oil prices brought down the headline CPI by 1.6 percentage points.

NEGATIVE GROWTH

After seasonal adjustments, the CPI rose 0.01 percent last month, and for the first two months, the inflationary indicator softened by 0.56 percent from the same period last year, the report said.

Food prices, which account for 25 percent of the CPI, fell 1.32 percent, with vegetable prices dropping 15.23 percent, easing the impact of the 4.59 percent and 2.08 percent price increases of fish and meat respectively, the DGBAS said.

Dining costs, which constitute 10 percent of the CPI, climbed by 3.76 percent last month, though the pace marked the slowest increase in 10 months, the report said.

Cheaper oil prices are likely to keep the inflationary gauge in negative zone for the entire first half of this year, contracting 0.33 percent this quarter and another 0.26 percent next quarter, DGBAS predicted last month.

Soft inflation pressure caused by cheaper oil is favorable for corporate profit margins, consumer spending and the economy as a whole, the DGBAS said.

Meanwhile, the wholesale price index, a measure of production costs, fell by 8.49 percent last month, the sharpest decline in almost five-and-a-half years, amid continued price falls for crude, chemical, basic metal and electronic products, the report said.

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