Weakening demand due to inflation in the US, which hit a 40-year high last month, but is expected to slow down gradually, could affect Taiwan’s exports of consumer electronics in the second half of this year, an economist said on Thursday.
The US consumer price index (CPI) soared 9.1 percent last month from a year earlier, the biggest annual increase since November 1981.
While US inflation is likely to slow down, the likelihood that CPI growth this month would remain above 8 percent is high, said Dachrahn Wu (吳大任), director of National Central University’s Research Center for Taiwan Economic Development.
Moreover, with US unemployment remaining low at 3.6 percent last month, the US Federal Reserve is likely to go ahead with its plans to raise key rates by at least 0.75 percentage points, Wu said.
The Fed’s big policy rate hikes have caused a rapid rise in mortgage rates for home buyers, he said.
This, plus soaring consumer prices, could further squeeze US consumers’ budget for non-essential items, affecting Taiwan’s exports of smartphones, notebooks, bicycles and other consumer goods in the second half, he said.
As a result, upstream suppliers — including semiconductor makers — could be affected in the long run, Wu added.
While Taiwanese chipmakers have continued to expand capacity in the past two years, they should be alert to a decline in demand from the US and Eruope, which could affect capacity utilization and constrain the finances of weaker companies, he said.
The 9.1 percent increase in US consumer prices last month could be the peak of inflation for now, judging by a recent fall in international oil prices, said Darson Chiu (邱達生), a research fellow at the Taiwan Institute of Economic Research’s international affairs department.
The slowdown from March of monthly increases in the US producer price index and a stronger US dollar, which generally pushes the prices of international raw materials lower, appear to support estimates that CPI growth already hit a peak last month and that it would gradually moderate, Chiu said.
The seasonally adjusted producer price index for final demand increased 0.8 percent in May. This increase followed rises of 0.4 percent in April and 1.6 percent in March, US Bureau of Labor Statistics data showed.
Chiu predicted that the Fed would raise its benchmark interest rate by three-quarters of a percentage point or 1 percentage point at its meeting later this month.
Taiwan’s CPI rose 3.59 percent last month, the highest in nearly 14 years and the fourth consecutive month in which inflation exceeded 3 percent, the Directorate-General of Budget, Accounting and Statistics reported on July 6, adding that it should be the highest for this year.
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