Inflation drops for the first time in three years

By Amy Su  /  Staff reporter

Fri, Sep 06, 2013 - Page 13

The nation’s headline inflation reading last month recorded its first year-on-year contraction in three years, mainly due to the comparison base effect, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said in a report yesterday.

The consumer price index (CPI) fell 0.79 percent last month compared with a year ago, following growth of 0.06 percent year-on-year in July, marking its first year-on-year decline since August 2010, the DGBAS said in its monthly report.

On a seasonally adjusted basis, CPI edged up 0.02 percent last month from July, the report said.

Although Tropical Storm Trami and Tropical Storm Kong-Rey struck Taiwan late last month, raising vegetable and fruit prices from a month earlier, the impact was less than that of the two severe storms that struck the nation — Typhoon Saola and Typhoon Tembin — in August last year, the DGBAS said.

Therefore, vegetable and fruit price showed a 23.75 percent year-on-year decline last month from a month ago, with fruit prices down 12.79 percent during the period, the report’s data showed.

That made overall food prices drop further by 3.39 percent last month from a year earlier — the largest decrease among the six main sectors surveyed by the DGBAS.

However, compared with July, the weather and stronger seasonal demand triggered by the mid-summer Ghost Month still increased prices in the food sector by 0.81 percent last month, with vegetable and fruit prices up 1.17 percent and 11.54 percent month-on-month respectively, government statistics showed.

DGBAS deputy director Tsai Yu-tai (蔡裕泰) said that there was no concern over potential deflation as core CPI — which excludes vegetable, fruit and energy prices — still expanded 0.48 percent last month from a year ago.

“Overall, consumer prices [in Taiwan] remained stable,” Tsai told a press conference.

ANZ Research shared the DGBAS’ views, saying Taiwan will not enter a period of prolonged deflation.

“The state-owned CPC Corp, Taiwan [台灣中油] has started to lift fuel and gas prices in September in light of rising global energy prices,” ANZ Greater China senior economist Raymond Yeung (楊宇霆) said in a research note.

Yeung said geopolitical tension in the Middle East will continue to back crude prices over the near future.

In addition, Taiwan has seen pressure of capital inflows recently, which could be a reason propelling the relatively strong currency rate of the New Taiwan dollar further, which may lead to a more relaxed exchange rate policy and some imported inflation, Yeung said.

The wholesale price index extended its trend of year-on-year contraction last month, falling by 2.13 percent from the same period last year, its 18th straight month of decline, according to DGBAS’ statistics.

Yeung said the central bank is expected to hold the policy rates at its boarding meeting on Sept. 26, before hiking the rates at the December meeting, while the bank’s move to issue two-year negotiable certificates of deposit was seen as a signal of monetary tightening.