Consumer confidence improves to 3-year high in July

Taipei, July 29 (CNA) Taiwan's consumer confidence index (CCI) rose to the highest in almost three years in July after moving higher for the third consecutive month, with most of the index's six factors on the rise, National Central University (NCU) said Monday.

Citing a survey conducted from July 18-21, NCU said the local CCI rose 2.67 points from a month earlier to 75.36 in July, the highest since August 2021, when the index stood at 75.43.

The CCI gauges the level of confidence people have in consumer prices, the local economic climate, the stock market, the likelihood of purchasing durable goods, employment prospects and family finances over the next six months.

In July, the sub-index for consumer prices rose to 38.41, up 5.93, the highest growth among the six major factors, the survey showed. The sub-index hit the highest level since October 2021, when the sub-index stood at 38.80.

Speaking with reporters, NCU Economic Research Center director Dachrahn Wu (吳大任) said the survey was conducted before Typhoon Gaemi made landfall in eastern Taiwan on July 25.

The storm, resulting in 10 fatalities and 895 injuries, with two people still missing, caused an estimated NT$1.8 billion (US$54.79 million) in agricultural losses. Wu said he is worried the heavy losses could lead to a spike in agricultural product prices, pushing up local consumer prices.

In the first half of this year, Taiwan's CPI rose 2.27 percent with core CPI, which excludes fruit, vegetables and energy, up 2.02 percent, above the 2 percent alert level set by the central bank.

In addition, the sub-indexes for employment, family finances and the local economic climate also moved higher by 4.09, 3.91 and 3.86, respectively, from a month earlier to 75.23, 82.89 and 87.38 in July, the survey found.

The July sub-index for family finances hit its highest level since October 2021, when the sub-index reached 87.10, while the sub-index for the local economic climate moved to its highest since April 2022, when it hit 89.40.

Since the beginning of this year, the local stock market has risen sharply, allowing consumers to feel their wealth is growing, offsetting the impact from a spike in consumer prices, Wu said.

Bucking the upturn, the sub-index on purchases of durable goods remained unchanged from a month earlier at 111.67 in July, while the sub-index on the local stock market fell 1.82 from a month earlier to 56.56, according to NCU.

There has been a decline in faith in the local stock market after stocks started technical corrections in recent sessions as investors rushed to pocket earlier gains, Wu said.

Before Monday, the Taiex, the weighted index on the Taiwan Stock Market, had lost 3.96 percent since the beginning of this month. However, it had still soared more than 23 percent since the beginning of this year amid the frenzy about artificial intelligence development.

Wu said he remains cautious about how massive investments in AI applications will deliver profits to the business sector in the future, adding that if earnings fall below expectations, the stock market could suffer a major pullback that would undermine consumer confidence.

The scholar said although markets at home and abroad have embraced high hopes that the U.S. Federal Reserve will start a rate cut cycle as early as September, there are worries the U.S. economy, the largest in the world, will see a rise in unemployment and a fall in consumption, which could affect Taiwan's exports.

In NCU surveys, a CCI sub-index score of 0-100 indicates pessimism, while a score of 100-200 shows optimism, the university said, noting that the only factor that showed optimism in July was the likelihood of purchasing durable goods over the next six months.

Also in July, another NCU survey conducted jointly with Taiwan Realty showed a month-on-month rise of 0.1 points in the index for home buying, which stood at 107.0.

The university's CCI survey in July collected 3,016 valid questionnaires from consumers in Taiwan 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.