Consumer confidence impacted by selective home market credit controls

Taipei, Oct. 28 (CNA) Taiwan's consumer confidence weakened in October, ending five-months of growth, after the central bank launched a seventh round of selective credit controls on the home market a month earlier, National Central University (NCU) said Monday.

Citing a survey conducted from Oct. 18-21, NCU said the local consumer confidence index (CCI) fell 0.78 points from a month earlier to 77.06 in October after a 0.09 percent month-on-month increase in September.

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

With the central bank's latest round of credit controls on the home market and banks tightening lending to home buyers as their mortgages rise closer to the ceiling, NCU Economic Research Center director Dachrahn Wu (吳大任) said consumer faith in the property market has been impacted.

Wu said even if many people in Taiwan remain willing to buy homes, the increasing hurdles to securing bank loans will make it harder for those who are at a relative economic disadvantage to fulfill their hopes, which could push down property transactions.

However, it will still not be easy for home prices to fall in a meaningful manner, he added.

Of the six factors that make up the October CCI, five moved lower with the sub-index on the likelihood of purchasing durable goods, such as homes and cars, over the next six months falling 2.05 from a month earlier to 107.69 in October, the steepest decline of the six.

The other four sub-indexes -- pricing, family finances, employment and the local economic climate over the next six months -- moved lower by 1.72, 1.35, 1.31 and 1.19, respectively, from a month earlier to 41.77, 85.03, 78.18 and 89.37 in October, the survey found.

The falling confidence in family finances, employment and the local economic climate reflects concerns over the U.S. economy, which is weakening with consumption affected, which could hurt Taiwan's production and exports, Wu said.

Although the local tech sector continued to benefit from an era of booming artificial intelligence development, the pace of the recovery among old economy industries still remains slow, Wu added.

If the impact from a slower U.S. economy escalates and the AI bubbles burst, Taiwan's economy could suffer, he said.

Bucking the downturn, the sub-index for the stock market over the next six months rose 2.91 from a month earlier to 60.29, according to the survey.

Wu said after contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) gave positive leads at an investor conference on Oct. 17, saying its sales for 2024 will grow almost 30 percent from a year earlier in U.S. dollar terms, the company's share price soared to push up the broader market, which boosted faith in the equity market in the month.

Before Monday, the Taiex, the weighted index on the Taiwan Stock Exchange, had risen 337.47 points, or 1.47 percent, since Oct. 16.

However, Wu urged investors to remain alert over a possible technical pullback after the strong showing of the Taiex, as many enterprises have not delivered satisfactory sales numbers yet from their massive investments in AI development.

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 October was the likelihood of purchasing durable goods over the next six months.

Also in October, another NCU survey conducted jointly with Taiwan Realty showed a month-on-month fall of 2.06 points in the index for home buying, which stood at 104.67.

The university's CCI survey in July collected 3,082 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.