• July inflation at 1.9 %


    Steady from June but double yr-ago; full-yr seen at 1.98%

    HEADLINE inflation in July held steady at the preceding month’s level of 1.9 percent although it was more than double the rate of 0.8 percent in July last year, data from the Philippine Statistics Authority (PSA) released on Friday showed.

    Core inflation also held steady at 1.9 percent this July compared with a year earlier.

    For headline inflation, the year-on-year rise in prices was traced to non-essentials such as alcoholic beverages and tobacco, as well as furnishing, household equipment, routine house maintenance; and recreation and culture, the PSA said.

    Month-on-month, food prices marked a slowdown, offsetting the yearly increases in non-essentials and non-food.

    Socioeconomic Planning Secretary Ernesto Pernia said inflation is expected to be manageable for the rest of the year to average 1.98 percent for full-year 2016.

    “The manageable inflation trend in the first seven months of 2016 is expected to continue for the rest of the year considering the expanding productive capacity of the domestic economy, persistently low oil prices, solid private household consumption and investment, buoyant business and consumer sentiment, and adequate credit and domestic liquidity,” said Pernia who is also NEDA director general.

    “We are thus expecting full-year inflation to average at around 1.98 percent,” he added.
    A Bank of the Philippine Islands (BPI) analyst said the slightly below-forecast inflation rate due mainly to lower food prices was a surprise amid an El Niño dry spell.

    “Judicious rice importation carried out in the previous months helped stave off stark inflation pressures in food prices, a practice we hope that will be continued given that we roll right into a severe La Niña episode,” BPI associate economist Nicholas Antonio Mapa said, noting that keeping the food basket in-check is key in helping ensure that inflation remains low and stable.

    The BPI economist added that the bank continued to see the effects of the protracted oil price slump with utilities and transport remaining in deflation territory.

    “With oil prices recovering slightly from the lows, we may see inflation for these sub indices trend back into marginal inflation ranges going forward.  Base effects may also push inflation back into the target range given the sub-1 percent prints this time in 2015,” he said.

    ‘Monthly inflation within target’

    The central bank said the July inflation rate supports its view that monthly inflation will creep to within target range, with full year average just at or slightly below the lower bound for 2016.

    “The risks to the inflation outlook remain broadly the same–weaker global growth outlook counterbalanced by steady domestic aggregate demand,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. told reporter in a text message.

    Nevertheless, he said the BSP continues to be mindful of external developments particularly geopolitical risks that could trigger volatility in commodity prices and portfolio rebalancing.

    “Closer to home we will monitor developments with respect to changes in weather patterns that could affect domestic supply chains,” he said.

    Supporting the central bank’s view is NEDA’s Pernia, who said that on the domestic front, government needs to stay vigilant and prepare for the upcoming La Niña through ensuring the completion of flood control projects, and improving agriculture logistics.

    “In order to reduce potential sources of upside price pressures, we also need to ensure that prices of utilities such as electricity and water are stable. Existing petitions for upward adjustment in power prices should be reviewed thoroughly,” he said.

    Details of July

    According to the National Economic and Development Authority (NEDA), food inflation slowed to 2.8 percent in July from 3.0 percent in the previous month.

    Indices for food and non-alcoholic beverages, health, communication, and education also registered slower annual increments while annual declines were observed in the indices of housing, water, electricity, gas, and other fuels and transport.

    On an annual basis too, food and non-alcoholic beverages marked slower increases—2.7 percent against 2.9 percent.

    July’s 1.9 percent inflation rate was identical to the estimate of the Department of Finance and within the 1.5 percent to 2.4 percent range that the Bangko Sentral ng Pilipinas (BSP) had estimated for the month. It also fell within the 1.3 percent to 2.2 percent range that
    private-sector analysts polled by The Manila Times projected.

    Meanwhile, the average inflation rate for the first half of 2016 was 1.4 percent, well below the 2-4 percent that BSP set for the year.

    Inflation among commodity sub-items, like meat and vegetables. Prices of milk, cheese, and eggs remained constant while prices of fish, breads and cereals experienced upward pressures but, NEDA said, not enough to pull down the average price for the overall food group.

    “Lower annual mark-ups were also noticed in the indices of meat and sugar, jam, honey, chocolate and confectionary at 2.2 percent and 3.3 percent, respectively,” it said.

    Rice inflation, on the other hand, slightly increased to 0.4 percent in July 2016 from 0.2 percent in the previous month, which may be attributed to declining harvests as July marks the start of the lean months for rice.


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