Consumer confidence weakens as fears over inflation grow

Consumer confidence weakened for the third consecutive month in October as fears over inflationary pressure increased, sending the sub-index gauging the inflation confidence factor to a low in 17 months, according to National Central University (NCU).

The consumer confidence index (CCI) fell 0.13 points from a month earlier to 74.26 in October, with the sub-index on confidence in inflation falling 1.2 from September to 38.8, the lowest level since May 2020, when the sub-index stood at 35.35, NCU said, citing its survey conducted Oct. 18-21.

The CCI is an indication of the level of public confidence in employment, family finances, consumer prices, the local economic climate, the stock market, and the likelihood of purchasing durable goods such as cars and homes during the coming six months.

While the central bank and the Directorate General of Budget, Accounting and Statistics (DGBAS) have reiterated Taiwan was faced with no inflationary pressure, raw material prices on the global market have been on the rise and it is possible that local vendors would pass on higher production costs to consumers, said Dachrahn Wu (???), director of NCU’s Research Center for Taiwan Economic Development.

“Taiwan is enjoying an improving economy but concerns over inflation among consumers have been running deeper,” Wu said.

In the third quarter of this year, Taiwan’s gross domestic product (GDP) grew 3.8 percent, beating an earlier forecast of a 3.31-percent increase made by the DGBAS in August.

The DGBAS said Taiwan’s GDP growth for 2021 could hit 6.01 percent on the back of strong exports, compared with the previous forecast of a 5.88-percent rise made in August.

But, the consumer price index rose 2.63 percent in September from a year earlier, the biggest jump in over eight years, and well above the 2-percent threshold. In the first nine months of this year, the CPI averaged 1.74 percent.

As for the CCI, Wu said, the month-on-month fall in October was the smallest in three months, indicating the impact from an outbreak of domestically transmitted COVID-19 cases in mid-May has been lessened.

Among the other five factors in the CCI, the sub-indexes on employment, the timing of durable goods purchases, the local economic climate, and family finances moved higher by 0.75, 0.65, 0.3, and 0.1, respectively, from a month earlier to 66.55, 116.8, 88.9, and 87.1 in October, according to the survey.

On the other hand, the sub-index on the stock market performance fell 1.4 from a month earlier to 47.4 in October, the survey found.

According to the survey, the fall in the stock market was the steepest among the six factors, causing the overall CCI to move lower.

The equity markets at home and abroad experienced volatility amid worries over a move by the U.S. Federal Reserve to downsize its asset purchases in November at the earliest, which is expected to drain liquidity from the markets, said Wu.

A sub-index score of 0-100 indicates pessimism, while a score of 100-200 shows optimism, NCU said, noting that optimism was seen in October only in the sub-index for the likelihood of purchasing durable goods.

The NCU survey in May collected 2,876 valid questionnaires from local consumers aged 20 and over. It had a confidence level of 95 percent and a margin of error of plus or minus 2.0 percentage points

Source: Focus Taiwan News Channel