Taiwan’s inflation rate hit a four-year low in May, with the Consumer Price Index (CPI) rising just 1.55% year-over-year, down from 2.03% in April. The Directorate General of Budget, Accounting and Statistics (DGBAS) attributes this moderation to lower food and energy prices, improved weather conditions, and a strengthening Taiwan dollar.
📊 Key Insights and Original Analysis
✅ Why May’s CPI Growth Slowed
- Improved Weather Stabilized Food Prices
The weather remained stable throughout May, resulting in better crop yields. This stabilized fruit prices and actually reversed the rise in vegetable prices, reducing food-related inflationary pressure — a major component in CPI calculations. - Drop in Global Crude Oil Prices
The continued drop in international oil prices lowered transportation and fuel-related costs, contributing significantly to the deceleration in headline inflation. - Currency Appreciation Reduced Import Costs
The Taiwan dollar appreciated 7.09% against the U.S. dollar, making imported goods cheaper. This has especially helped sectors relying on foreign inputs like manufacturing and retail.
🍽️ Dining Out Costs Remain Stubbornly High
Despite the overall decline in inflation:
- Dining-out costs surged by 3.5% year-over-year, the highest increase in 15 months.
- Analysts warn this is driven by rising labor costs and sticky service prices.
However, Tsao Chih-hung of DGBAS noted that with no electricity price hikes in April, inflation in food services is likely to stabilize in the coming months.
🧮 Core CPI Trends and Economic Outlook
- Core CPI (excludes energy and food): 1.61%
This figure has stayed under the Central Bank’s 2% alert level for 14 straight months, indicating that long-term inflationary pressures remain under control. - Outlook for June and Beyond:
Due to last year’s Dragon Boat Festival effect (which pushed prices up in June 2024), the base comparison should help further ease inflation figures next month. - Second Half Forecast:
Inflation expected to stay under 2%, assuming no major typhoons or oil shocks. Businesses are also less likely to raise prices due to lower import costs.
📉 Producer and Import Price Trends
- PPI fell 4.3% YoY — indicating cheaper costs at the production level.
- Import Price Index dropped 9.05% in NT$ terms — lowest in nearly two years.
➡️ These trends point to reduced cost pressure on manufacturers, which may eventually lead to lower consumer prices if businesses pass on the savings.
📌 Why This Matters
- For Consumers: Relief in grocery and fuel prices offers better household budget stability.
- For Businesses: Lower input costs can increase profit margins or encourage price competitiveness.
- For Policymakers: Eases pressure on Taiwan’s central bank to hike interest rates, allowing more room to focus on growth-oriented policies.
❓FAQs
Why did Taiwan’s CPI slow in May 2025?
Due to better weather stabilizing food prices, lower global oil prices, and a stronger Taiwan dollar reducing import costs.
What is Core CPI and why does it matter?
Core CPI excludes food and energy to reflect long-term inflation. In May 2025, it was 1.61%, staying below the Central Bank’s 2% target.
Why are dining-out costs still rising?
Mainly due to high labor and service costs, even as other prices fall. Electricity cost stability may help ease this in coming months.
What is the outlook for inflation in the second half of 2025?
Inflation is expected to remain under 2%, barring unforeseen events like typhoons or energy shocks.
How does the Taiwan dollar’s appreciation impact inflation?
A stronger NT$ makes imported goods cheaper, reducing pressure on local prices and helping control inflation.
