Taiwanese consumers are bracing for a significant surge in living costs, with a recent poll revealing an 8.77% average increase in expectations over the next year. This outlook is particularly striking given that official inflation data has yet to reflect the full impact of rising prices. The survey, conducted by Academia Sinica's Institute of Economics, highlights a growing sense of economic uncertainty among the public. The findings indicate that consumers are anticipating higher inflation even before it becomes apparent in the consumer price index (CPI). Despite Taiwan's CPI rising only 1.20% year-on-year in March, the survey suggests that the public is already feeling the pressure of rising prices. The Institute of Economics attributes this shift in sentiment to the US-Iran war, which has caused a spike in global energy prices and transportation costs. While government measures have helped mitigate the impact of higher international energy prices, the CPI has still exceeded the government's 2% inflation warning threshold in recent months. The import price index, measured in New Taiwan dollars, also rose 23.07% year-on-year last month, underscoring the mounting external cost pressures. Among the various categories surveyed, transportation and energy costs are expected to rise the most, by an average of 15.87%, followed by food and dining expenses at 12.54%. This outlook is concerning, especially given the cooling property market following the central bank's credit controls. Despite this, more than half of respondents still anticipate home prices to rise over the next six months, with an average expected increase of 2.04%. The survey also examined the impact of the government's universal cash handout. The marginal propensity to consume was estimated at 0.29, suggesting that the cash payments may have a limited effect on boosting consumption or domestic demand. However, the survey also highlights the potential benefits of targeted cash payments, with the research fellow, Yang Shu-chun, suggesting that imposing conditions on eligibility could improve their effectiveness. This poll underscores the complex economic landscape that Taiwanese consumers are facing, with rising costs, uncertain inflation, and the potential impact of government policies. As the situation unfolds, it will be crucial to monitor how these expectations translate into real-world outcomes and how policymakers respond to the challenges posed by inflation and economic uncertainty.
