Philippine inflation slows further on lower food, oil prices, energy cost

07, Aug. 2019

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MANILA, NNA – Headline inflation in the Philippines continued to slow down to 2.4 percent in July as food prices, which pushed up the consumer price index to a 10-year high last year, went down further, data from the Philippine Statistics Authority released Tuesday showed.

The PSA also attributed the decline to lower fuel and energy prices. The latest reading is within the lower-end of the government target of 2 to 4 percent, as widely expected, and the slowest in 31 months.

Key points:

―― The July inflation is the slowest since the 2.2 percent recorded in December 2016 and the same rate as the July 2017 figure. Excluding selected food and energy items, core inflation continued to slow down at 3.2 percent from 3.3 percent in June. Year-to-date inflation reached 3.3 percent in July from 3.4 percent in June.

―― The slowdown is mainly the result of the slower rate of the increase in heavily-weighted food and non-alcoholic beverages, at +1.9 percent in July compared to +2.7 percent in June. The PSA noted the deceleration in rice prices (-2.9 percent in July vs. -1.7 percent in June) as the main contributor to the decline in the prices of the food basket.

―― “Ample domestic food supply conditions have supported continued easing of price pressures,” the Bangko Sentral ng Pilipinas said in a statement.

―― Housing, water, electricity, gas and other fuels (2.2 percent vs. 3 percent) also contributed to the downward trend in inflation, particularly electricity (-0.5 percent vs. 2.1 percent), and liquefied petroleum gas (-5.9 percent vs. 0.2 percent), which is commonly used for household cooking in the Philippines.

―― Further deceleration in prices of fuel, petroleum for personal transport (-2.8 percent vs. -4.1 percent), as well as lower Jeepney fares (-2.1 percent vs. 6.0 percent) and domestic airfares (-11.5 percent vs. -9.7 percent) also contributed to the lower inflation, the PSA said.

―― “We welcome this decelerating trend in prices but we remain on guard against possible upside risks such as adverse weather conditions, possible entry of the African swine fever, and uncertainty in the global oil market, among others,” Socioeconomic Planning Secretary Ernesto M. Pernia said in an emailed press release.

Takeaway:

―― Economists believe the widely expected decline in inflation may continue in the coming months ahead, and may open the door to additional policy easing.

―― “If recent trends persist, we expect headline inflation to continue to drop below the Bangko Sentral ng Pilipinas' 2 to 4 percent target range in September,” Noelan Arbis, economist at HSBC, said in an emailed report.

―― “Further easing trend of inflation would increase the chances or odds and justification for further local monetary easing by way of another cut in local policy rate of at least -0.25 as early as the next local rate-setting meeting on August 8, 2019,” Michael Ricafort, economist at local lender Rizal Commercial Banking Corp., said in an emailed statement.