Rate hikes hurt consumer confidence

GLOOM::A Cathay Financial survey found 41% of respondents were negative about the economy, against 22% who were positive, with 86.6% expecting higher prices

By Crystal Hsu  /  Staff reporter

Wed, Sep 18, 2013 - Page 13

Public confidence in the economy weakened further this month as people turned conservative about spending for fear of higher expenses caused by electricity rate hikes scheduled to take effect next month, a Cathay Financial Holdings Co (國泰金控) survey released yesterday found.

About 41 percent of respondents expect the economy to deteriorate in the coming six months, while 22 percent have a positive outlook and 31.2 percent hold a neutral view, the monthly survey found.

Cathay Financial linked the worsening sentiment to jitters over inflationary pressures that may materialize after the government raises electricity prices from next month to ease the burden on state-run utility Taiwan Power Co (Taipower, 台電).

Electricity rates will rise by 9 percent or 10 percent for industrial use, and between 3 percent and 4 percent for households, according to the new rate schedule.

The rate adjustments were cited by 86.6 percent of those polled as the reason they are expecting higher consumer prices in the next half of the year, versus 1.6 percent who are expecting lower costs, the survey showed. The remaining 9.8 percent believe consumer prices will remain unchanged.

Forty-two percent of participants said they expect the consumer price increase to be between 3 percent and 6 percent, 27.3 percent said they thought it would higher than 6 percent and 28.3 percent predicted prices to rise 3 percent or less.

Meanwhile, 64.3 percent of the respondents expect their wages to remain at current levels, while 22.2 percent voiced concern about decreased income, the survey showed. Only 13.5 percent reported feeling upbeat about higher salaries in the future.

Faced with potential price hikes, 41.8 percent of those polled expressed a declining interest in buying durable goods and another 33.9 percent plan to cut purchases of big-ticket items, the survey said.

The poor sentiment led 70.3 percent to conclude that it is ill-advised to buy houses at the moment, while 38.2 percent think it is wise to offload property holdings, the poll showed. The finding suggests a mismatch between supply and demand that may impede transactions.

The survey also found that approximately 44 percent ofrespondents have no idea about the government’s plan to include the financial sector in the free economic pilot zones and 60.2 percent had no interest in taking part in the new business.

The finding suggests ample room for improvement on behalf of policymakers to make the economic reform better known to the public, Cathay Financial said.