The consumer price index (CPI) declined 0.66 percent last month from the same period the previous year as cheaper fuel costs depressed the inflationary gauge, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.
The absence of inflationary pressure gave the central bank room to extend its loose stance on monetary policy and weaken the local currency to shore up exports and the economy as a whole, economists said.
“The CPI lost 0.66 percent last month because energy and communications cost reductions more than erased food price increases,” DGBAS Deputy Director Tsai Yu-tai (蔡鈺泰) said at a press conference.
Photo: CNA
Overall, transportation and communications costs contracted 5.95 percent year-on-year last month, subdued mainly by a 24.74 percent fall in fuel prices, the DGBAS said in a report.
It was the eighth consecutive month that fuel prices dropped by more than 20 percent and that subtracted 0.92 percentage points from the CPI, the report said, adding that the reading would have registered a 0.26 percent increase if the oil price distortions were stripped out.
Household living costs shed 0.76 percent due to lower gas and electricity prices, the report said.
However, food prices gained 1.77 percent on the back of higher vegetable, meat and dining costs, though cheaper eggs and fruit eased the pickup, it said.
The CPI slid into negative territory after a seasonal adjustment with a 0.78 percent decline last month, compared with a 0.17 percent gain in June.
For the first seven months of the year, the index contracted 0.65 percent from the previous year as international crude oil prices continued to weaken, the report said.
However, Tsai dismissed concerns over deflation, saying that the core CPI remains in the positive zone as a result of healthy consumer activity.
Core CPI, a more reliable inflationary reference because it excludes volatile items, posted a 0.66 percent increase, from a revised 0.59 percent uptick in June, the report said.
The absence of inflationary pressure means the central bank can ease its monetary policy with comfort if necessary, as the global slowdown saps exports and GDP growth, Yuanta-Polaris Research Institute (元大寶華研究院) chairman Liao Kuo-yuan (梁國源) said.
“A weak New Taiwan dollar can surely help raise profit margins for exporters amid tepid demand, as the market has ample liquidity,” Liang said by telephone.
The central bank is likely to maintain its policy rates in the foreseeable future, but the chance of a rate cut is rising given disappointing GDP growth in the second quarter.
The wholesale price index (WPI), a measure of commercial production costs, retreated 9.98 percent, the steepest fall in 71 months, widening from a revised 9.43 percent decline in June, the DGBAS said.
The latest WPI figure stemmed from sustained declines in the prices of crude oil, basic metals and chemical products, the agency’s report said.
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