Inflation might have sounded far-fetched one or two quarters ago as Taiwan’s export-oriented economy faced uncertainty from the COVID-19 pandemic and prolonged US-China trade tensions, but that risk is mounting, with upticks in component and raw material prices stirring up concern about rising prices for electronics and daily essentials.
Laptop computer makers Acer Inc and Asustek Computer Inc last week announced rare price hikes of 5 to 10 percent on new models from this quarter, as manufacturing costs have spiked.
This is the first noticeable increase in laptop prices in about a decade — a peculiar phenomenon, as the price of electronics typically follows a downward trajectory. The PC makers blamed increases in the prices of key components, such as chips and flat panels, over the past few quarters.
As lockdowns to contain the spread of COVID-19 have forced people to work and learn remotely, laptop demand has outstripped supply and pushed prices even higher. Acer said that it can only supply 30 percent of its orders.
Supply chains indicate that no relief is in sight, while some chipmakers have said that supply constraints on raw materials and key components might last for up to two years.
Market researcher Omdia expects prices of flat panels to surge 30 to 40 percent in the first half of this year compared with the end of last year, meaning that electronics prices might rise further and stay high for some time.
The manufacturing purchasing managers’ index (PMI) for last month pointed to an upturn in consumer prices, as prices of oil, raw materials and bulk commodities spiked, and producers might soon pass costs on to consumers, Chung-Hua Institution for Economic Research president Chang Chuang-chang (張傳章) said on Thursday last week. The price index for raw materials used by local manufacturers jumped for a 10th consecutive month to 91.6, the first time in its history that the reading surpassed 90, the private think tank said in a news release.
The nation’s consumer price index (CPI) in February climbed 1.37 percent year-on-year, its most rapid pace in 13 months, the Directorate-General of Budget, Accounting and Statistics said, while core CPI, which excludes vegetables and fuel, soared even faster at 1.63 percent annually, its highest level in three years.
National Development Council Minister Kung Ming-hsin (龔明鑫) has said that domestic consumer prices should remain stable, with a reading for the whole of this year of 1 to 1.5 percent, citing projections by some economists, but the estimate does not fully account for recent upswings in global commodity prices.
US soybean futures last week remained elevated, after they last month briefly reached their highest level in seven years due to the effects of climate change, boding ill for food prices. Also, global prices for corn and wheat have so far this year increased more than 20 percent.
Global crude oil prices have also significantly increased, although CPC Corp, Taiwan has not fully passed on the higher costs to local consumers.
The average price of Brent crude oil last month soared more than 30 percent to US$65.39 per barrel, from US$49.93 in December last year, but CPC during the same period only raised the price of 95-octane unleaded gasoline 11 percent to NT$28.3 per liter.
Given that global commodity prices are posing a greater threat to domestic consumer prices, government agencies should be ready with countermeasures to avoid having a ripple effect stir up the nation’s long-inert inflation.
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