Inflation slows on falling food prices

DEFLATION?:Despite near zero-growth in the consumer price index, the DGBAS said deflation was not a concern as core CPI still expanded 0.51 percent last month

By Amy Su  /  Staff reporter

Tue, Aug 06, 2013 - Page 13

Despite the damage wrought by Typhoon Soulik last month, headline inflation recorded its slowest year-on-year increase in nearly three years, as food prices fell on peak harvests, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.

The consumer price index (CPI) rose 0.08 percent last month compared with a year ago and June’s annual increase of 0.6 percent, marking its slowest growth since August 2010, the DGBAS said in its monthly report.

On a seasonally adjusted basis, the gauge edged up 0.03 percent last month from June, the report said.

The decline in food prices was the major factor behind the CPI’s near-zero growth, DGBAS deputy director Tsai Yu-tai (蔡裕泰) said.

Food prices slid 1.24 percent last month from a year earlier, marking their first year-on-year decline since September 2010, as vegetable and fruit prices plummeted, Tsai said.

“Although the onslaught of Typhoon Soulik raised the prices of certain vegetables and fruit in the middle of last month, food prices fell because of abundant supply and a higher comparison base last year,” Tsai told a press conference.

Fruit prices shrank 20.2 percent last month from a year earlier because of peak summer harvests, while vegetable prices slid 3.12 percent, the report showed.

Tsai added that there was no concern over potential deflation as core CPI — which excludes vegetable, fruit and energy prices — still expanded 0.51 percent last month from a year ago.

“Current consumer prices are continuing their mild pace of expansion,” Tsai said.

However, following the government’s plan to raise electricity rates and Taiwan High Speed Rail Corp’s (台灣高鐵) move to increase ticket prices by the end of this year, consumer prices may be placed under pressure in the near future, Tsai said.

Meanwhile, the wholesale price index (WPI) fell 2.13 percent last month from the same period last year, its 17th straight month of decline, the report showed.

CPI growth in the first seven months of the year rose 1.13 percent from a year earlier, while the WPI dropped 2.95 percent year-on-year, data showed.

Hong Kong-based Credit Suisse AG economist Christiaan Tuntono said headline inflation was likely to stay subdued in the coming months, barring adverse weather, which could drive up fruit and vegetable prices.

Despite weak price pressures, Tuntono said that the central bank was unlikely to ease the discount rate further in the second half of the year as the economy was starting to show signs of improvement.

In addition, worries about speculative investment and higher asset prices because of easy monetary policy continue to weigh on the central bank, he said in a note.