The consumer price index (CPI) contracted by 0.8 percent last month from a year earlier, widening from a 0.61 percent decline in March, as cheaper fuel prices dragged down transportation costs by more than 20 percent for the fifth consecutive month, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.
The decline is steeper than the consensus expectation of 0.65 percent, but should not cause worry, as crude oil price distortions may taper off in the second half, economists said.
Fuel costs slumped by 25.38 percent year-on-year last month, dragging the inflationary gauge by 0.94 percentage points, DGBAS Deputy Director Tsai Yu-tai (蔡鈺泰) told reporters.
Fuel price declines more than muted the 1.5 percent increase in food costs that account for 25 percent of the CPI, the statistics agency’s report said.
“The rise in food costs suggests healthy consumer demand, and the ongoing CPI contraction is temporary,” Tsai said.
Vegetable and fishery products rose by 14.78 percent and 2.11 percent respectively last month due partly to a low base a year earlier, the report said.
The inflationary reading gained 0.48 percent from March, and fell only 0.13 percent after seasonal adjustment, suggesting the contraction is easing, the report said.
Core CPI, a more reliable reference that excludes volatile items, remained in the positive zone with a 0.68 percent gain last month, affirming mild inflation on the back of the introduction of summer garments, the report said.
Dining costs, which make up 10 percent of the CPI, registered a 2.37 percent increase, the smallest gain in 14 months, removing some financial burdens from people who eat out, the agency said.
For the first four months, the CPI dropped by 0.64 percent while core CPI grew by 1.02 percent, the report said.
The wholesale price index (WPI), a measure of commercial production costs, fell by 9.15 percent last month, the biggest drop in more than five-and-a-half years — and worse than the 8.75 percent decline in March, the report said.
The figure indicated that raw material prices have yet to show signs of stabilization. As of last month, the WPI weakened by 8.64 percent, the report said.
Looking forward, headline CPI is likely to remain subdued this quarter, limited by lower electricity and water bills, thanks to the new electricity pricing formula and the rebate program to benefit households who are affected by water rationing, Barclays PLC said in a note.
The British banking group stands by its forecast of a 0.3 percent increase for Taiwan’s CPI this year, slightly higher than the 0.26 percent estimate by the DGBAS in February.
The ultra-low inflation will allow the central bank room to maintain current interest rate till the end of this year, the note said.
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