Inflation Q1 average seen at 4.2%; to ease later – think tank


Inflation is likely to average 4.2 percent in the first quarter of the year but will ease in the succeeding quarters as the agriculture and energy sectors may recover from the impact of recent calamities and bring consumer prices back to normal levels, a local think tank said.

First Metro Investment Corp. (FMIC) – University of Asia & Pacific (UA&P) Market Research in its newsletter The Market Call said supply constraints triggered by recent weather related production disruptions resulted in a slightly faster pace of inflation in January of 4.2 percent, compared with 4.1 percent recorded in December.

The acceleration was traced to a 5.6 percent rise in the heavily weighted food and non-alcoholic beverages.

“The recent upward trend in inflation appears to stem from supply shocks, but the anticipation of the agricultural sector’s recovery in the second quarter should help ease food prices … [We] maintain our view that inflation will normalize in the coming months,” First Metro Investment Corp. (FMIC) – University of Asia & Pacific (UA&P) Market Research said in its publication The Market Call.

For the FMIC – UA&P, the rise in inflation for the period appears to be temporary blips because of supply shortages in the aftermath of Super Typhoon Yolanda and the government’s over-optimism about rice output in the fourth quarter of 2013.

“We expect inflation to ease as food supplies become more adequate and power producers complete the rehabilitation and resume operations,” it said.

The group’s inflation outlook is premised on lower crude oil dollar prices, as forecast by the US Energy Information Administration.

The publication noted that in January, crude oil prices dropped across the board due to weak global demand and higher production from outside the Organization of the Petroleum Exporting Countries.

Inflation data for March is scheduled for release by the Philippine Statistical Authority and the Bangko Sentral ng Pilipinas (BSP) on Friday.

The central bank has forecast that March inflation might settle within the 3.7 percent to 4.6 percent range as upward price pressures are seen coming from higher rice prices because of the lean season, while lower electricity rates and petroleum prices could offset some of the upside pressures.

The BSP also lowered its inflation forecast for full-year 2014 to 4.2 percent from a previous projection of 4.3 percent as inflation expectations remain broadly aligned with its 3-percent to 5-percent target band.


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