Sat, Feb 06, 2016 - Page 13 News List

CPI rises 0.81%, highest in 14 months

DOUBLE WHAMMY:Last month’s cold snap that damaged crops and shrunk supplies, combined with the Lunar New Year shopping demand, drove up prices

By Crystal Hsu  /  Staff reporter

The nation’s consumer price index (CPI) gained 0.81 percent last month from a year earlier, rising at the fastest pace in 14 months, as Lunar New Year demand drove up food costs, and the effect might be more evident this month, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.

The mild increase in the government’s inflation gauge gives the central bank room to cut interest rates next month to stimulate the economy without concerns over runaway inflation.

“Prices of vegetables, fruit, fishery products and home appliances all rose last month compared with a year earlier, underpinning the CPI increase,” DGBAS Deputy Director Tsai Yu-tai (蔡鈺泰) said at a news conference.

Taiwanese celebrate the week-long Lunar New Year holiday with family reunions and feasts, driving up food costs throughout the season.

The cold snap last month also contributed to the CPI’s increase, as it damaged crops, shrinking supplies, Tsai said.

Both factors will persist for a while, as another cold front is to arrive over the weekend and the holiday is to last through next week, Tsai added.

Prices of oranges and mustard greens, among other things, shot up due to their association with good luck, longevity and prosperity, making them popular during the holiday season, Tsai said.

Fish are also in high demand, because its Mandarin pronunciation sounds like the word “abundance.”

The CPI after seasonal adjustment fell 0.22 percent last month, affirming the holiday’s effect on prices, the report said.

Food costs increased 2.71 percent last month from a year earlier, raising the inflationary gauge by 0.43 percentage points, the report said.

Living costs increased 1.57 percent last month, attributable to a 21.18 percent hike in electricity prices, the report said, as electricity rebates last year lowered the comparison base, it said.

Cheaper oil prices remained a drag on transportation and communication costs, which declined 2.88 percent last month from a year earlier, Tsai said, citing the 15.5 percent decline in international crude prices as the main reason.

The wholesale price index — a measure of production costs — fell 4.82 percent last month, significantly easing from a revised 7.23 percent decline in the previous month, the report said.

The factor depressed export prices by 7.84 percent last month in US dollar terms, meaning an equal volume of shipments would cost less this year, unfavorable for export showings, the report said.

Poor exports might prompt the central bank to cut interest rates by another 12.5 basis points during its next board meeting in March to stimulate GDP growth, DBS Bank and Deutsche Bank forecast.

Lower borrowing costs might allow companies more incentive to increase capital expenditures, they said.

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