Money supply indicators saw growth slowdown in February

This article was published by the Taiwan Headlines on April 7, 2006. it reports that as a result of the recent cash- and credit-card debt turmoil, the annual growth of Taiwan's three money supply indicators - M1A, M1B and M2 - all witnessed a fall in February 2006.

M1A refers to currency in circulation, checking accounts and passbook deposits. M1B is M1A plus passbook savings deposits. M2 is M1B plus quasi-money, including time and savings deposits, foreign currency deposits, postal savings deposits, etc.

According to statistics released by Taiwan's Central Bank of China, in February 2006, the annual growth rate of M2 dropped to 6.52 percent from 7.2 percent in January. M1A tumbled by 3.94 percent to 5.95 percent, while M1A dropped 2.81 percent to 5.58 percent. These falls were attributed to a decline in the inflow of foreign equity funds and a shrinkage in loans extended by banks.

In February 2006, loans offered by financial institutions to private sectors posted a monthly fall of NT$80.5 billion (US$2.37 billion), the first drop of its kind in 12 months. However, the passbook deposits registered by individuals and enterprises in February increased by NT$67.4 billion (US$1.98 billion), which helped boost total outstanding deposits to NT$7 trillion (US$205.88 billion). Meanwhile, local-currency deposits placed by foreigners rose by NT$20.8 billion (US$611.77 million) to NT$223.9 billion (US$6.59 billion). Such increase in demand deposits were mainly caused by the strong performances of the local stock market.

According to the Central Bank of China, bad cash- and credit-card loans seems to have little influence on Taiwan's commodity prices and economic growth - at least in the first two months of the year. Indeed, the annual rise of consumer price index (CPI) in January and February 2006 averaged at 1.84 percent, while the percentage for the full year is estimated at 1.71 percent. Nonetheless, the Central Bank of China will keep an eye on the movement of the domestic commodity prices and take proper countermeasures when necessary.