Falling consumer and wholesale prices last month may signal that Taiwan's economic growth is recovering slowly, pundits said yesterday.
"It looks like we are not experiencing a V-shaped recovery," said Frank Hu (
The council had previously predicted that an economic recovery would begin in the second quarter. Hu said that as a result, in the second quarter, "consumers will be more willing to buy and consumer prices will stop dropping."
The decline in both the consumer and wholesale price index yesterday triggered speculation over whether domestic demand would begin to rise.
"The price drop will surely attract some buyers, boosting demand, but it is also likely to cause corporate earnings to slip," said Cheng Cheng-mount (鄭貞茂), an assistant research fellow at the Taiwan Institute of Economic Research (TIER, 台經院).
He was not optimistic about short-term demand, saying that "it is expected to be weak since there is no indication that personal income is rising."
Chou Chi (周濟), a researcher at the Chung-hua Institution for Economic Research (CIER, 中經院), went further by warning of a serious deterioration in domestic demand, according to a CNA report.
While speaking at a seminar on cross-strait industrial development yesterday, Chou said that if the current trend continues, the government should pay more attention to deflationary tendencies.
Shrugging off such concerns, Wu Chung-chi (吳忠吉), a professor of economics at National Taiwan University, said that deflation is unlikely while admitting that consumer demand may not rise dramatically in the near-term.
"The decline the indexes only reflects the past economic slump," he said.
Wu said market forces will continue to drive wages lower, making it cheaper for companies to operate.
Consumer prices are set to rise following government-instigated price increases on rice wine, water and electricity, Cheng said.
And, although consumers expect cheaper products to flood into Taiwan following WTO entry, their expectations may be in vain.
"Within two to three months, consumers will eventually come to realize that there will be no major price reductions as a result of entry into the trade organization," Hu said.
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