DOF expects slower May inflation at 3.2%

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THE Department of Finance (DOF) said headline inflation this month likely slowed to 3.2 percent from 3.4 percent in April given an easing in food prices.

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The estimated rate would still be higher than the 1.6 percent posted a year earlier.

But the slowdown this month would be a respite from the relentless acceleration in consumer price growth that had brought the rate to a 28-month high of 3.4 percent, hit in March and sustained in April.

The government has a working target of between 2 percent and 4 percent for any given month this year and for full-year 2017.

“This deceleration may be traced to the easing in food prices, primarily of vegetables, which are forecast to drop from 8.1 percent to 4.7 percent. This will cut down food inflation from 4.2 percent to 3.8 percent,” Finance Undersecretary Gil Beltran said in his latest Economic Bulletin submitted to Finance Secretary Carlos Dominguez 3rd.

Earlier, the Bangko Sentral ng Pilipinas (BSP) gave a forecast range of 2.9 percent to 3.7 percent for this month, owing to a series of rollbacks in fuel pump prices, as well as the downward adjustment in power rates.
Official headline inflation figures for May are set for release by the Philippine Statistics Authority on June 6, Tuesday.

“Inflation for clothing and footwear, electricity, gas and other fuels, and transport will drop by 0.3 to 0.4 percentage point,” Beltran, who is the DOF’s chief economist, said.

The easing of inflation “will give policymakers adequate room for maneuver to sustain rapid economic growth in the face of another possible adjustment in the Fed rate in June,” he said, referring to the expected increase in key US interest rates.

In May, index heavyweights food and non-alcoholic beverages are expected to drop to 3.8 percent from 4.2 percent last month, along with prices of alcoholic beverages and tobacco to 6.2 percent from 6.3 percent.

Also, prices of clothing and footwear may decline to 2.3 percent in May from 2.7 percent in April; furnishings, household equipment to 2.3 percent from 2.4 percent; and recreation and culture to 1.4 percent from 1.5 percent, according to the report.

Prices of health services could also lose pace to 2.4 percent from 2.5 percent; transport to 2.9 percent from 3.2 percent, and communication to 0.2 percent from 0.3 percent.

Housing, utilities and fuel prices, however, are expected to rise slightly from 3.6 percent in April to 3.7 percent in May, but the sub-segment electricity, gas and other fuels may drop to 8.2 percent from 8.5 percent in the preceding month.

Education will show a steady rise at 1.8 percent.

The report said that in the first four weeks of May, Manila Electric Co.’s (Meralco) rate per kilowatthour (kWh) for an average of 200 kilowatts-per-month consumption dipped to P9.6 from P9.9 in April, but stood higher than P8.4 a year earlier.

Meralco’s generation rate per kWh also fell to P4.9 during the month from P5.1 in April, but rose from P3.9 the previous year, it said.

The average price of diesel in Metro Manila among the “big three” oil companies dropped to P30.8 per liter from P31.4 the previous month, but rose from P26.4 a year earlier, the DoF Economic Bulletin said.

Meanwhile, the average price of gasoline in the first four weeks of May increased to P45.3 per liter from P45.1 in April and P40.4 in May of last year.

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