05.08.2001
Consumer good prices down, inflation in check
The Consumer Price Index rose 0.4% YoY in April, resulting in 0.5%
growth YtD. Education prices posted the largest YoY gain with 5.2%, followed by oil
prices, which were up 4.8%. Meanwhile, clothing prices declined 2.0% compared to April
2000 and food prices 0.7%. Although we remain unconcerned about deflationary pressure, we
do not see any pressure from the general price level and forecast CPI growth will come in
well below 1% in 2001.
Consumer good prices were down 0.7% YoY in April amid weak consumer
confidence, which is dampening private consumption growth. We predict private consumption
growth will slow down to 3.5% in 2001 from 5.5% in 2000. Therefore, we do not anticipate
any inflationary pressure from consumer good prices this year. The service price index
rose 1.8% in the month.
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| Source: DGBAS |
Last month, the wholesale price index contracted 0.2% YoY to register
0.4% YtD growth. Import prices in NT$ terms were up 1.0% from the same period last year,
while export prices grew 1.8% on limited weakening of the local currency.
 |
| Source: DGBAS |
Furthermore, with the unemployment rate testing new highs (3.9% in
March), there is no sign of inflationary pressure from wages. With inflation in check and
unemployment at record highs, we expect Taiwan's Central Bank (CBC) to continue to reduce
interest rates further. The CBC has already cut interest rates five times since December
2000, bringing its rediscount rate down to 4.0% in April from 4.75%. We predict the CBC
will cut its rediscount rate to 3.75% by the end of 1H01.
IrmakSurenkok@Primasia.com +886-[0]2-2547-8873 |
