Inflation at 6-month low in June
INFLATION IN THE PHILIPPINES fell to its lowest level in six months in June after three consecutive months of steadily rising prices, the Philippines Statistics Authority (PSA) said on Tuesday.
Preliminary data from PSA showed a titer inflto 4.1% in June, after an annual change of 4.5% in May. However, this figure was still higher than the 2.5% recorded in June of last year.
The latest overall figure is lower than the median of 4.3% in a Business world survey conducted at the end of last week. Nonetheless, it fell within the estimate of 3.9% to 4.7% given by the Bangko Sentral ng Pilipinas (BSP) for June.
June’s print was also the slowest in six months, up from the 3.5% annual rate in December 2020. Before June’s result, year-on-year inflInflation has remained unchanged for three consecutive months at 4.5%.
Year-to-date inflation has stood at 4.4%, still above the BSP’s 2% to 4% target this year and above the 4% forecast for the year. whole year.
Core inflation, which takes into account volatile food and energy prices, stood at 3%. This rate was slower than the 3.3% recorded the previous month, but it was stable compared to the rate recorded the same month last year. Core inflation has averaged 3.3% so far this year.
The PSA attributed the slowdown in June mainly to the drop in the annual rate of increase of the transport index to 9.6% from 16.5% in May. Other commodities that saw their prices increase more slowly include alcoholic beverages and tobacco at 11.2% versus 11.8% in May, clothing and footwear at 1.6% versus 1.7%, health at 2.9% against 3.2% and communication at 0.2% against 0.3%.
Heavily weighted foods and non-alcoholic beverages rose to 4.7% in June from 4.6%.
Similar to the result of headline inflation, the inflThe inflation rate for the poorest 30% of households fell to 4.3% in June, from 4.5% the previous month. It was still, however, faster than the 3% print in June 2020.
The inflation rate of the bottom 30% takes into account the spending habits of this income segment. Thus, its consumer price index differs from that of the average household, the former assigning a greater weight to basic necessities.
In a statement, the National Economic and Development Authority (NEDA) attributed the decline in inflation in June to government policies put in place to lower food prices, especially meat.
Food inflation stood at 4.9%, unchanged from May, but still above the 2.7% posted in June of last year.
Annual price increases for meat and milk, cheese and eggs slowed to 19.2% and 1%, respectively, from 22.1% and 1.4% in May.
At the same time, annual decreases were observed for rice (-1.1% in June after -0.8% in May), fruits (-0.6% after -1.1%) and vegetables (-2 , 7% after -6.6%).
More rapid increases in fish prices (8.7% vs. 7.8%) offset the trend slightly; corn (5.3% against 5.1%); oils and fats (4.2% from 4%); sugar, jam, honey, chocolate and confectionery (1% from 0.9%) and food products “not elsewhere classified” (1.4% from 1.2%).
“The decline of meat inflation underlines the positive effects of Executive Decrees (EO) 133 and 134. These are expected to further lower meat prices in the second half of the year, ”said Socio-Economic Planning Secretary Karl Kendrick T. Chua, quoted in the NEDA press release. .
President Rodrigo R. Duterte signed EO 133 and 134 which increased the pork import quota and changed the tariff rates on imported pork products, respectively.
NEDA also cited other government interventions such as pig restocking programs, zoning and vaccine development for African swine fever (ASF) and the signing of EO 135 which lowered tariffs. on rice imports at 35% against 40% for one year.
As a reminder, Mr Duterte declared a year of state of calamity on May 10 due to the ASF outbreak.
The NEDA also noted the downward trend in transport inflation, but said the costs of transport services “remain high” due to physical distancing measures and the recovery in global oil prices.
“This is expected to partially decrease in the short term with the government’s accelerated immunization program,” NEDA said.
Economists expect inflation to be on a downtrend in the coming months, but have signaled risks to the outlook such as high global oil prices and the depreciation of the peso that will contribute to inflationary pressures from rising import prices.
Bank of the Philippines Islands chief economist Emilio S. Neri, Jr. said his full-year inflation forecast had been lowered to 4.3% from 4.5% despite the “downside risks. the increase “which could keep inflation above 4% in the coming months.
“Despite the reduction in pork tariffs, the price of pork has not shown a substantial decrease. In addition, oil companies have announced several increases in oil prices in recent weeks and could translate into less favorable base effects for transportation, ”Neri said in an email.
“Except inflAtion, another factor that could challenge the ability of the BSP to keep interest rates stable is the hawkish tilt of the Federal Reserve. The US central bank recently provided a timeline on when it could possibly raise interest rates, hinting that this could happen in 2023. This means there is a chance that the Fed could start cutting rates. bond purchases in 2022, ”he added.
Mr Neri also pointed to the possibility of “currency adjustments” in the coming months as the peso hit the level of P 49 per dollar – its weakest in nearly a year.
The chief economist of Rizal Commercial Banking Corp. Michael L. Ricafort also stressed that the peso was a “compensatory risk factor for inflation” because it “would gradually lead to a certain recovery in import prices and headline inflation,” he said. declared in a text message.
Nonetheless, Ricafort expects monetary policy to remain accommodative in terms of keeping the key interest rate at a record 2% “for as long as needed, with a possible drop in the reserve requirement ratio of the big banks compared to the current 12%… ”
In a statement, ING Bank NV Manila senior economist Nicholas Antonio T. Mapa said the likelihood offlInflation reaching 5% this year “has fallen considerably” and BSP is expected to “only consider adjusting its policy by mid-2022”.
“With the easing of price pressures, we expect toflration to decelerate in the second half of the year as meat prices normalize, the authorities authorizing a higher import volume for this product. Meanwhile, the base effThe effects of social distancing guidelines for transport and other services are also expected to fade in the coming months, offsetting an expected acceleration in utility and fuel costs given soaring global oil prices, ”Mapa said.
In an email, UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion said inflation would likely be “slightly above” the BSP’s 2-4% target range for this year, with further easing next year.
“Expect upward pressure on price levels from rising oil prices, but we maintain our view that demand has been subdued due to the limited reopening of the local economy. This could counter the expected rise in fuel prices overall, ”he said. – BTM Gadon