Taiwan’s consumer confidence index (CCI) fell for the fourth consecutive month in December to its lowest level in more than 13 years, amid concerns over inflation and higher interest rates, National Central University (NCU) said Tuesday.
The December index was down 0.88 points from November to 59.12, its lowest level since hitting 56.45 in September 2009, when Taiwan’s economy was starting to rebound from the 2008-2009 global financial crisis, according to data from NCU, which compiles the index.
Taiwan’s CCI fell to its all-time low of 48.42 in February 2009 at the height of the crisis.
The index gauges people’s confidence toward employment prospects, household finances, consumer prices, the local business climate, the stock market and durable goods purchases over the next six months, and is often used to predict consumer spending.
According to NCU, a CCI index or sub-index score of 0-100 indicates pessimism, while a score of 100-200 shows optimism.
Taiwan’s overall CCI has never reached 100, peaking at 92.93 in April 2015.
In the December survey, conducted Dec. 18-21, only confidence in consumer prices rose, by 0.05 points from a month earlier to 27.2, while the sub-indexes for the other five factors all moved lower.
The sub-index on family finances dropped 0.55 points to 70.9, the lowest since April 2010, indicating family finances have gotten worse, said Dachrahn Wu (???), director of NCU’s Research Center for Taiwan Economic Development.
Wu said Taiwan’s economy could face challenges in the coming year because of high inflation worldwide and the ongoing tightening of monetary policy by major central banks around the world.
While people are pinning their hopes on stronger domestic demand to boost the economy and offset an expected decline in exports, those hopes may not be realized given that the manufacturing sector has yet to hit bottom and the labor market is weakening, Wu argued.
Moreover, Taiwan’s central bank has raised interest rates several times this year, leading to rising borrowing costs for Taiwan’s roughly 2 million mortgage holders, Wu said.
The sub-index on employment fell 0.55 points from a month earlier to 61.1, the lowest since January 2010, when it registered 43.50 (before catapulting to 61.95 the next month amid the recovery).
Wu predicted more enterprises will carry out unpaid leave programs and layoffs in the first half of 2023 as export-oriented manufacturers face heavier financial burdens due to declining orders and revenue and higher borrowing costs.
Higher electricity rates for large industrial users could also take a toll on many large businesses, he said.
Asked when the economy could rebound, Wu said unemployment in the United States has to hit 5 percent or inflation needs to fall below 5 percent before the U.S. Federal Reserve stops raising interest rates and even considers cutting them.
That will help the global economy to recovery gradually, rekindling the potential for export growth in Taiwan, said Wu, who forecast such a rebound could occur as soon as in the second half of 2023.
Meanwhile, the sub-index on durable goods purchases fell 2.1 points from a month earlier to 99.9, edging below the 100 point threshold that divides pessimism and optimism, according to the survey.
As for timing on buying a home, a separate index jointly compiled by the university and Taiwan Realty Co. dropped by 2.25 points to 100.4 this month, the lowest since September 2020.
NCU’s December survey collected 2,870 valid questionnaires from consumers in Taiwan aged 20 and older. 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