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Taiwan CPI Down Again YoY in February to Trigger Deflation Fears

Apr 08, 2015 | By Ken Liu

Taiwan's consumer price index (CPI) for this February slipped 0.19 percent from the same month of last year, according to the Directorate General of Budget, Accounting and Statistics (DGBAS) under the Taiwan Cabinet.

Although the February index was 0.36 percent higher than in the previous month, the figure marks the second consecutive year-on-year drop in the island's CPI so far this year, triggering fears of potential deflation.

DGBAS Minister Shih Su-mei attributes the drop in the index mostly to falling crude oil prices worldwide and recent offer of discounted electricity bill by Taiwan Power Co., Ltd., the monopoly utilities firm in Taiwan.

Officials of the Central Bank point out that the 1.21 percent year-on-year increase in Taiwan's core CPI for the first two months of this year suggests the island's commodity prices were on moderate growth track, hence making fear of deflation unwarranted.

DBGAS officials point out that Taiwan's fuel prices dropped an average 28.1 percent year on year in February due to record-setting low global oil prices that have plunged from US$100-plus a barrel in 2014 to sub-US$50 recently, contributing 1.06 percentage points of decrease in the year-on-year CPI recession of February.

Typical household electricity bills slumped 24.7 percent year on year in February due to the discount of NT$800 (US$25.80) per household, contributing to 0.54 of a percentage point in the year-on-year CPI decline.

The fuel price decline and electricity bill discount accounted for 1.6 percentage points of the February CPI decrease.

DBGAS officials predict the impact of the two factors on Taiwan's CPI to taper off over the next few months, to eventually cut 0.07 of a percentage point off the CPI for both March and April.

In spite of the negative CPI growth in the first two month of this year, DBGAS officials point out that the island's core CPI, excluding vegetables, fruit and energy, for this February rose 1.78 percent year on year, hitting two-year high to indicate that commodity prices grew moderately on the island.

DBGAS officials attribute the core CPI growth mostly to the hiked taxi fare (typically fractionally higher to reward cabbies for the holiday season) and higher pay for nanny or babysitting services that were in demand as parents traditionally go on vacation, visit friends and relatives or go out to entertain during the Chinese New Year, with the two categories of outlay having spiked 54.9 percent this February from the same month last year.

They point out that although the general CPI dropped in February, prices of eggs, meats, vegetables, and seafood remained high due to robust demand during the Chinese New Year, with pork price rising 20 percent year on year to hit six-year high.

Prices of the 17 categories of staples or necessities that the Cabinet had been watching closely throughout this February increased at annual rate of 3.76 percent, sub-4 percent the first time since March last year.

Although the growth rate of the island's dining-out outlay, now accounting for nearly 10 percent of Taiwan's CPI index, registered a 10-month low in February, it still rose 3.76 percent year on year in February due to its inherent marginal fluctuation.
(KL)


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