Consumers expect living costs to rise 8.8% over next year: Academia Sinica

Taipei, July 13 (CNA) Taiwanese consumers expect their cost of living to rise by an average of 8.77 percent over the next year, reflecting growing inflation concerns even before higher inflation becomes evident in official data, according to a survey released Monday by Academia Sinica.

The Institute of Economics at Academia Sinica said 63.17 percent of respondents surveyed in March expected living costs to increase over the following 12 months.

The findings came from the institute's Taiwan Consumer Expectations and Policy Response Survey, which has been conducted quarterly since the beginning of this year to gauge public expectations on inflation, housing prices and government policies.

Institute of Economics research fellow Yang Shu-chun (楊淑珺) said the results showed consumers have begun to anticipate higher inflation before it is reflected in official statistics.

Although Taiwan's consumer price index (CPI) rose only 1.20 percent year-on-year in March, respondents already expected stronger price pressures, she said.

The institute attributed the shift in sentiment to the outbreak of conflict between the United States and Iran, which pushed up global energy prices and raised transportation and petroleum-related costs.

While government measures helped cushion higher international energy prices, CPI exceeded the government's 2 percent inflation warning threshold in both May and June.

The import price index, measured in New Taiwan dollars, also rose 23.07 percent year-on-year in June, indicating mounting external cost pressures, the institute said.

Among the categories surveyed, consumers expected transportation and energy costs to rise most over the next year, by an average of 15.87 percent, followed by food and dining expenses at 12.54 percent.

Despite a cooling property market following the central bank's seventh round of selective credit controls, more than half of respondents still expected home prices to rise over the next six months. While 30.65 percent thought prices would remain broadly unchanged, 53.11 percent anticipated further gains, though the average expected increase narrowed to 2.04 percent.

The institute also examined how consumers used the government's NT$10,000 (US$311) universal cash handout.

The survey estimated the marginal propensity to consume (MPC) at 0.29, while a separate telephone survey put the figure at 0.15, close to the 0.16 recorded after the government's NT$6,000 universal cash payment in 2023.

Since both estimates were well below one, the institute said universal cash handouts are likely to have only a limited effect on boosting consumption or domestic demand.

Yang said cash payments could still be effective, but argued that imposing conditions on eligibility, rather than distributing them universally, would improve their effectiveness.