Taiwan's third quarter real gross domestic production, on a seasonally unadjusted basis. was 5.3% above the third quarter of 2003 In nominal terms it was 4.7% above a year ago, indicating that deflation is still a factor in the Taiwanese economy.The attached chart shows the year-to-year changes in Taiwan's real and nominal GDP.

Detailed data for the third quarter real GDP are not yet available, but the nominal data indicate that the improvement in capital spending that began late last year is continuing at a fast year-over-year rate of 20.1%. Exports are up almost 20% and imports, probably reflecting the strength in capital spending, are up 30.3%. Even private consumption expenditures are showing strength. Although, the year-to-year increases have been declining this year, they are well above the quarters of last year.

While changes in the deflator are still negative, changes in consumer and wholesale prices have become positive. Big increases in agricultural products and petroleum products have led to sharp increases in wholesale prices that are beginning to affect consumer prices. In the table below we have aggregated the monthly wholesale and consumer data to quarterly for easy comparison with the GDP deflator. The second chart compares the year-to-year change in the GDP deflator and the Consumer Price Index.