March inflation likely at 1.0-1.3% – analysts

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The country’s inflation is expected to rise in March due to the recovery in oil prices and increase in consumption approaching the summer months, but will still be well below the government’s target range of 2 percent to 4 percent, analysts said ahead of the release of official data on Tuesday.

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Justino Calaycay, head of marketing and research at A&A Securities Inc., said that the country’s inflation will pick up to 1.1 percent to 1.3 percent in March—from 0.9 percent in February—due to the increase in oil prices and spending in the private sector.

“We think inflation picked up between 1.1 percent to 1.3 percent in March given the recent hikes in oil prices and increased private spending, alongside the start of the election season,” Calaycay said in an email interview.

In March, international oil prices slightly recovered, reaching $36.60 per barrel as of end-March from the $30 to $35 per barrel low in February.

Calaycay said that as the country approaches the summer months, consumption of utilities—power and water—had started to increase beginning in March, which contributes to higher consumer spending.

“Utility rates and use—especially water utilities—also went up as the summer months approach. However, the corresponding rise in spending may have been tempered by a drop in transportation fares [taxi and jeepney, PUVs],” he said.

Calaycay said the Bangko Sentral ng Pilipinas (BSP) would be cautious on external jitters that can affect inflation, especially the US Federal Reserve.

“At this point, the BSP is focused on what its peers in the region and across the globe are doing. In particular, there will be much attention to the US Federal Reserve, especially in the face of what is expected to be improved economic numbers in the US,” he said.

For his part, Moody’s Analytics Associate Economist Jack Chambers told The Manila Times that inflation will end higher from a month ago but still likely only rose slightly to 1.0 percent.

“We expect headline inflation will increase slightly to one percent year-on-year for March,” Chambers said.

“While oil prices rebounded slightly in March, this will take time to filter down to consumer prices. In the meantime, energy prices will still be low. Also, increases in food prices will be restrained due to the effects of the El Niño dissipating, improving crop yields and food supply,” he added.

Chambers said the central bank appears “comfortable” even as the economy “expands its pace.”

“The low inflation environment gives the BSP room to move in the event that severe, and unlikely, downside scenarios materialize, such as a more rapid decline in Chinese economic growth,” the Moody’s economist said.

According to data from the Philippine Statistics Authority, February inflation ended at 0.9 percent, which is lower than the 1.3 percent in January. The central bank earlier attributed this to slower growth in prices in housing, utilities, gas and transport.

For 2016 to 2018, the BSP is targeting inflation to settle between 2 percent and 4 percent.

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