The consumer confidence index this month gained 1.88 points to 76.52, its highest since March last year, as the economic situation improved at home and abroad, fueling inflation risks and concern over potential capital flight from equity markets, a National Central University survey released yesterday showed.
Spikes in raw material prices would eventually drive up inflation readings and prompt central banks worldwide to step in and tighten interest rates, said Dachrahn Wu (吳大任), director of the university’s Research Center for Taiwan Economic Development, which conducted the survey.
Changes in monetary policy, especially by the US Federal Reserve, would trigger capital flight from global bourses, Wu said, calling on investors to be cautious.
Photo: Tang Tsai-hsin, Taipei Times
Of the consumer confidence index’s sub-indices, the gauge on stock investment rose the most. It increased 5.4 points to 52.5, despite share price corrections among major tech firms, Wu said.
“Inflation risks pose a substantial challenge for policymakers worldwide this year,” Wu said, adding that the US producer price index rose significantly, heaping inflation pressure on consumer prices, which might hit the 2 percent alert level in the first half of this year.
The Fed would have no choice but to raise interest rates to keep inflation at bay, Wu said, adding that inflation risks could haunt Taiwan, as evidenced by escalating oil and iron ore prices.
Bank deposits would become attractive following interest rate hikes, he added.
The 10-year Treasury yield has already jumped above 1.6 percent, better than the dividend payouts most technology firms can offer, analysts have said.
The sub-index on the job market rose 4.2 points to 70.55, while the measure on economic outlook gained 1.55 points to 89.5, the monthly survey showed.
People also became more confident about household income moving forward, tipping the sub-index 1.3 points higher to 91.95, it said.
The sub-index on purchases of durable goods dropped 1.05 points to 111.6, as interest in real-estate properties remains healthy, the survey said.
Confidence scores of higher than 100 suggest optimism and values lower than the threshold indicate pessimism.
The reading on inflation expectations was 43, a fractional 0.15 point lower than one month earlier, meaning that the public is not concerned about price hikes, the survey said.
The survey polled 2,832 adults by telephone from March 18 to 21. It has a margin of error of 2 percentage points.
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