Decrease in Inflation Rate: June's Rate Drops to 1.37%
Taiwan's Consumer Price Index (CPI) is projected to see a moderate increase in the upcoming month, according to the central bank. Despite this rise, the CPI is expected to remain within the bank's 2 percent target for the second half of 2025.
Several factors are contributing to this anticipated increase. Fluctuations in global commodity prices, such as oil and raw materials, can push production and transportation costs higher, feeding into consumer prices. Similarly, rising costs in the domestic service sector, including utilities and labor, can also contribute to CPI growth. Notably, the unsustainability of utility subsidies may put upward pressure on prices.
Taiwan's economy has benefited from robust global demand for emerging technologies, encouraging firms to increase production and inventory stocking. This temporary increase in costs can contribute to higher prices. However, positive shifts in market sentiment and economic confidence, as indicated by recent surveys, are driving consumption and demand, further contributing to an uptick in CPI.
Unpredictable weather events can also cause price volatility, affecting agricultural output or energy consumption. However, the central bank expects to keep full-year CPI growth near 1.81% and core CPI growth at 1.69% for 2025, both within their target range below 2%.
In the most recent data, the CPI rose 1.37 percent year-on-year last month. Among the seven major categories, food prices posted the highest annual gain of 2.82 percent, with fruit prices surging by 8.56 percent. Meanwhile, meat prices rose by 4.54 percent, but airfares decreased by 5.89 percent.
Inflation could edge higher this month due to seasonal factors, but is likely to remain under 2 percent through the second half of the year. Core CPI, which excludes volatile food and energy components, rose 1.47 percent. Housing costs increased by 1.76 percent, mainly due to rent and household service charges. Healthcare inflation was at 1.89 percent, due to higher registration and ward fees.
Despite these inflationary pressures, the cost of dining out increased by 3.44 percent, while transportation and communications costs fell by 1.36 percent, with fuel prices dropping by 8.16 percent. Auto repair costs rose by 2.73 percent, and prices for miscellaneous goods, including jewelry, tobacco, and betel nut, rose by 2.21 percent.
DGBAS official Tsao Chih-hung stated that price levels are broadly stable. The producer price index (PPI) last month fell by 5.47 percent, with egg prices falling by 8.5 percent. Despite these fluctuations, the overall inflation rate should stay contained within the central bank's target of around 2 percent in the latter half of 2025.
The increases in production and transportation costs, driven by fluctuations in global commodity prices such as oil and raw materials, could impact businesses in the finance sector. Similarly, rising costs in the domestic service sector, including utilities and labor, can have implications for businesses operating within the economy.
