• Oct inflation steady at 2.3%


    ‘Well within the projected manageable policy’ – BSP

    HEADLINE inflation in October maintained its pace at the 2.3 percent rate recorded in the preceding month, keeping the 10-month average within the 2 – 4 percent target range for the year, official data showed on Friday.

    Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. sees the latest inflation data staying well within the central bank’s projection of manageable policy, and expects the rate to rise slowly toward the 2017 and 2018 targets of 2.9 percent and 2.6 percent, respectively.

    “The turnout is in line with our view that inflation will be manageable over the policy horizon, and slowly rise to within target in 2017 to 2018. We will continue to monitor pending petitions for hikes in utility rates, among others, on the domestic front and global economic activity on the external front as well as risk factors to the outlook,” Tetangco said in a text message to reporters.

    The October rate stood within the 1.9-2.7 percent forecast range for the month, but jumped from the 0.4 percent recorded in October 2015.

    Mixed price movements

    The steady pace in October was traced to an offsetting of mixed price movements during the month.

    “Higher annual mark-ups were noticed in the indices of food and non-alcoholic beverages; clothing and footwear; furnishing, household equipment and routine maintenance of the house; and recreation and culture,” the Philippine Statistics Authority (PSA) said in a statement issued along with the figures.

    The rest of the commodity groups were either slower or remained at their last month’s rate, it added.

    Socioeconomic Planning Secretary Ernesto Pernia explained that slowdown further in a separate statement: “The steady inflation rate in October is due to slower increases in the prices of health commodities, and alcoholic beverages and tobacco.”

    Food supply expected to improve

    Although domestic demand was expected to remain strong, supply conditions, particularly of food, are expected to improve, said Pernia, who also heads the National Economic and Development Authority (NEDA).

    “This should help keep commodity prices steady. Rice prices will be kept stable by the timely arrival of rice imports under the government-to-government procurement scheme,” he added.

    Food inflation slightly increased to 3.5 percent in October from 3.1 percent in September.

    “Also, vegetable prices continued to remain elevated and further inched up in the same period due to limited supply owing to recent weather-related disruptions, particularly typhoons Lawin and Karen,” NEDA also said.

    Excluding selected food and energy items, core inflation similarly retained its previous month’s rate of 2.3 percent. In October last year, it was 1.5 percent.

    “But inflation for January to October 2016 averaged at 1.6 percent, well below the target range of 2 to 4 percent set by the government for this year. We expect inflation for full year 2016 to settle below the target range but upside risks remain,” Pernia said.

    Upside risks remain

    The economic planning agency noted upside risks remained, including a possible rally in oil prices, depreciation of the peso against the US dollar, pending petitions for higher electricity rates, and tropical cyclones.

    “Given the larger possibility of more frequent and stronger rains, the agriculture sector needs to implement adaptation measures to protect the income of farmers and keep food price inflation at bay,” Pernia said.

    Data from the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) showed a 65-percent chance of the La Niña developing in the fourth quarter of 2016 and may last until February 2017.

    “Given the larger possibility of more frequent and stronger rains, the agriculture sector needs to implement adaptation measures to protect the income of farmers and keep food price inflation at bay,” Pernia said.

    “We aim to strengthen the agricultural sector though a comprehensive agricultural development program, a major component of the proposed Philippine Development Plan 2017-2022,” he added.

    Tamer view

    But Eugenia Victorino of ANZ Research has a tamer view of inflationary pressures, saying that she expects “little risk of average inflation breaching the upper bound of BSP’s target in 2017” as prices are basically moving at a gradual pace.

    She said the forthcoming increase in excise taxes on oil is not likely to threaten the 2-4 percent target range of the central bank through 2018.

    On a regional basis, headline inflation in the National Capital Region (NCR) last month inched up at 2.1 percent from 2.0 percent in September. This brought the year-to-date inflation rate in the NCR to 1.0 percent.

    “Six out of the 11 commodity divisions record ed higher annual increases,” PSA said.

    In contrast, headline inflation in areas outside the NCR was unchanged at 2.4 percent. It brought the year-to-date inflation rate in areas outside of NCR to 1.8 percent.  Higher annual rates were observed in nine regions, while six regions posted slower annual gains.

    “The highest annual rate remained in Central Visayas at 4.0 percent while the lowest was in CALABARZON at 1.5 percent,” PSA said.


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