Taiwan Consumer Prices Fall Most in Five Years on Oil Prices

Prices in Taiwan fell in January by the most since November 2009, joining other economies with slowing or falling inflation as a result of lower oil prices.

Consumer prices unexpectedly dropped 0.94 percent in January from a year earlier. Economists had forecast a gain of 0.3 percent. Wholesale prices fell 7.57 percent, the island’s statistics bureau said in a statement today.

The first price drop in almost a year is likely to mean lower costs for consumers overseas, with export prices declining 2.67 percent in January from a year earlier. Shipments of electronics and petrochemicals to China, the U.S. and Europe account for about 70 percent of Taiwan’s GDP.

“The drop is mostly due to falling oil prices and fuel fees, and the effect will likely continue throughout the first half of this year, causing prices to stay flat or even fall,” said Gordon Sun, director of the Macroeconomic Forecasting Center at the Taiwan Institute of Economic Research.

Crude oil prices slumped almost 50 percent last year, the most since 2008, as increased production in the U.S. contributed to a global glut in supply.

The island’s central bank will probably still raise interest rates as a next step after keeping its benchmark rate on hold since 2011, particularly as housing prices remain high, said Raymond Yeung, a Hong Kong-based economist at Australia & New Zealand Banking Group Ltd.

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