Taiwan: ghosts aren’t immune to inflation

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The cost of feeding ghosts has been particularly high this year in Taiwan, following a series of typhoons that hit the island’s agricultural areas and pushed inflation to a four-year high.

The current month is known as Ghost Month and is said to be a time when spirits from the underworld can enter the world of the living. To keep the visiting spirits satisfied, many Taiwanese make offerings of fruit, dried food, incense, pretend money and in some cases, beer and Doritos. So the recent doubling of prices of dragonfruit and papaya, for example, is affecting both the spirit and mortal worlds.

Inflation is hitting just as the export-oriented economy is suffering, limiting the government’s tools for sparking growth.

The cost of food is up significantly over last year. Numbers out on Wednesday show inflation up 3.4 per cent from last year, nearly a percentage point more than expected. Vegetable prices were up 57.9 per cent year on year.

And although 3.4 per cent might not sound too bad, the government is targeting 2 per cent, and the economics minister Shih Yen-shiang said he would step down if inflation overshot. At time of writing he is still in his post.

The inflation figures come a few days after Taiwan’s PMI hit its lowest in eight months at 46.1, and its third consecutive month below the 50-mark that separates expansion from contraction. With new exports orders low, the manufacturing sector is looking weak, wrote HSBC economist Donna Kwok in a note. Over a quarter of Taiwanese work in manufacturing, and job losses would dent domestic consumption, which has stayed relatively stable in part because of service jobs created by Taiwan’s booming tourism industry.

“The steep decline in Taiwan’s PMI since May is symptomatic of the increasingly challenging external environment for Asian exporters,” wrote Kwok.

Last quarter, Taiwan’s GDP contracted 0.2 per cent as European and Chinese consumers bought fewer Taiwanese electronic products. Economists as well as the government’s own forecasters have been trimming their predictions for Taiwan’s full-year growth.

But rising inflation means few economists are predicting a rate cut when the central bank meets this month. Grace Ng, analyst at JP Morgan, suggests that if global conditions continue to deteriorate, however, a cut in the fourth quarter “cannot be ruled out.”

“Factors for Taiwan’s policy rate consideration are rather complicating at this juncture,” she wrote in a note.

For Taiwanese celebrating the Ghost Holiday, many have found ways to cut costs. One semi-retired woman said this year she had offered more dry food in place of fresh fruits. While she wouldn’t reuse offerings during the different ceremonies of the month – they have, in spirit, already been consumed – her family can use the dry food, rather than throw it away. Others said they found discounts by shopping online early.

Some savvy consumers even found ways to use the ghost holiday in a disinflationary way. The month is considered inauspicious for weddings, but one local businessman said his colleague recently got married because she was able to get a better price on the party.

Additional reporting by Jason Liu

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