Soaring food costs contribute to Consumer Price Index rising to 1.54%
The Producer Price Index (PPI) in Taiwan has seen a significant decline, with the index falling from 105.93 points in June 2025 to 105.49 points in July 2025. This decrease comes after a period of volatility earlier in the year, including a peak of 113.75 points in March 2025.
The PPI decline is primarily influenced by two main external factors. First, the appreciation of the New Taiwan Dollar (NTD) has put pressure on domestic exporters and manufacturers. As the NTD appreciates, the revenues of these companies, when converted back to NTD, effectively decrease, suppressing revenue growth. This currency appreciation dampens the pricing power for Taiwanese producers dealing in global markets, contributing to downward pressure on the PPI.
Second, the variability in global commodity prices and trade uncertainties have constrained manufacturing pricing and demand. Rising global economic uncertainty and trade protectionism, particularly from the US, have fluctuated demand and commodity prices. While demand for advanced sectors like AI and cloud computing remains strong, traditional sectors face weak demand and stiff low-price competition from abroad.
These factors have led to a broader decline in international commodity prices, easing import cost pressures. The overall inflation picture shows Taiwan's Consumer Price Index (CPI) grew modestly by 0.24% month-over-month in July 2025, whereas producer prices contracted by 6.44% year-on-year, indicating greater cost pressure at the production level than at final consumer prices.
Despite these challenges, the service and construction sectors show some signs of recovery supported by domestic demand and public projects. However, manufacturing sentiment remains conservative amid these currency and global commodity dynamics.
Tsao, an industry expert, stated that the impact of the 20% tariff on Taiwanese goods, starting today, is expected to be limited. The drop in the PPI reflects the deflationary impact of these external factors, with the deflationary impact outweighing any potential inflationary effects from reciprocal tariffs under current conditions.
In sum, Taiwan’s producer price index decline in recent months is primarily affected by the appreciation of the New Taiwan Dollar reducing export revenue in local currency terms and by variability in global commodity prices and trade uncertainties that constrain manufacturing pricing and demand.
The PPI decline in Taiwan, influenced by the New Taiwan Dollar appreciation and global commodity price variability, could potentially impact the local business sector, including finance, lifestyle, food-and-drink industries, as lower producer prices may affect the cost of raw materials and supplies. Consequently, these sectors might need to adapt their pricing strategies to maintain profit margins.
Moreover, the deflationary impact of the PPI decline could create a ripple effect, potentially lowering the prices of goods down the supply chain, influencing the overall lifestyle, food-and-drink, and even financial decision-making of consumers in Taiwan.
