Sat, Jun 06, 2015 page13

• CPI fell 0.73% last month, DGBAS says

  FUEL DISTORTIONS: The DGBAS said the unusually low price of oil had skewed statistics, and that stripped of its effect the CPI would have grown by 0.07 percent

  • By Crystal Hsu / Staff reporter
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  The consumer price index (CPI) declined 0.73 percent last month from the same period a year earlier, narrowing from a revised 0.82 percent contraction in April, as lower fuel prices continued to weigh on the inflationary reading, but the pace eased off on the back of oil price rebounds, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday.

  The CPI retreat might persist throughout this quarter, but might reverse its downward trend in the second half of this year, aided by summer electricity tariffs and often volatile vegetable and fruit prices amid the coming typhoon season, analysts said.

  Fuel costs plummeted 21.39 percent last month from a year earlier, down for the sixth consecutive month at a pace of more than 20 percent, dragging the sub-index on transportation and communication costs by 4.87 percent, DGBAS Deputy Director Tsai Yu-tai (蔡鈺泰) said.

  “Stripping fuel price distortions, the CPI would have recovered to the positive zone last month with a 0.07 percent increase,” Tsai told a media briefing.

  The inflationary reading picked up 0.24 percent last month from April and still gained 0.06 percent after seasonal adjustment, the DGBAS report said, dismissing concerns over deflation.

  Food costs increased 0.87 percent year-on-year last month, the slowest growth in 20 months, as vegetable and processed food prices gained 8.69 percent and 5.49 percent respectively, the report said, adding that dining expenses advanced 2.02 percent.

  The increase came even though fruit prices dropped 11.47 percent, Tsai said.

  Core CPI, a more reliable reference that excludes volatile items, registered a 0.61 percent increase last month, slowing from 0.66 percent in April, the report said, affirming healthy consumer activity.

  For the first five months of the year, the CPI dropped by 0.66 percent while core CPI grew by 0.94 percent from a year earlier, the DGBAS report showed.

  The wholesale price index (WPI), a measure of commercial production costs, fell 9.45 percent last month from a year earlier, widening than a 9.07 percent drop in April and the fastest decrease in 68 months, the report said.

  The WPI decline last month reflected weak mineral, chemical and basic metal prices, Tsai said, adding that lower electricity rates also pushed down the reading.

  As of last month, the WPI slipped 8.8 percent year-on-year, the report said.

  The headline CPI is likely to stay subdued this month and pick up gradually in the second half, both Barclays PLC and Standard Chartered Bank said in separate notes.

  “We expect electricity prices to rise on higher summer tariffs and heavy rainfall might drive up vegetable prices going forward,” Barclays senior regional economist Leong Wai Ho (梁偉豪) said.

  The soft inflationary pressure should not prompt the central bank to raise interest rates at its upcoming quarterly board meeting on June 25, Leong said.

  DBS Bank said the central bank would probably keep interest rates low for a longer period to support the economy.

  “We expect the benchmark discount rate to remain unchanged at 1.875 percent through the second half of 2015 to the first half of 2016,” DBS said in a note on Thursday.

  The Singapore-based lender’s forecast for the central bank’s first rate hike next year has been pushed back to the September quarter from the March quarter.
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