Philippine Nov CPI slows to 6% y/y on food but still above target

12, Dec. 2018

MANILA, NNA – Annual inflation in the Philippines posted the first slowdown this year, easing to 6 percent in November from 6.7 percent in October on lower food prices, but it was still well above the 3 percent seen a year earlier, Philippine Statistics Authority data released Wednesday showed.

The 6 percent year-on-year rise was the lowest since 5.7 percent in July.

But the core CPI excluding volatile food and energy prices -- a key measure of the long-term inflation trend -- picked up to 5.1 percent in November from 4.9 percent the previous month and 2.4 percent in November 2017.

The year-on-year rise in food prices slowed to 7.7 percent in November from 9.2 percent the previous month, thanks to increased supply of rice, fish, meat, vegetables, corn and fruit.

On the month, CPI fell 0.3 percent in November, the first drop since the 0.2 percent fall in February 2016, indicating a slowing trend in inflation, the PSA noted.

The annual inflation rate averaged 5.2 percent in the first 11 months of the year, which is still higher than the government’s inflation target range of 2.0 to 4.0 percent, but below the 5.3 percent forecast of the central bank for 2018.

“It is comforting for us that the slowdown will alleviate the struggles of poor Filipinos, especially now that the holiday season is just around the corner,” the economy managers said in a joint statement.

But a Manila-based think-tank said the reported drop in consumer prices might be due to the decline in global crude oil prices since October.

Sonny Africa, executive director of Ibon Foundation, argued that higher taxes in the first package of the government’s tax reform contributed to the current inflation rate.

“[The government] refuses to accept how the higher taxes from TRAIN (Tax Reform for Acceleration and Inclusion Act) have driven prices up and will do so again in less than a month,” Africa told NNA.

“The harsh reality for poor majority Filipinos is that prices are still much higher than last year amid low wages and job losses,” he said.

The government’s economic team said the deceleration last month in consumer prices is an indication of “the efficacy of anti-inflationary measures taken by the government… pointing to continuing reduction going forward.”

The government removed non-tariff barriers on imports of agricultural products after rice prices surged due to supply constraints. The congress also passed the Rice Tariffication bill to lift restrictions on imports.

President Rodrigo Duterte has given the greenlight to an additional excise tax on fuel next year under his controversial tax reform package, which critics fear might cause another rise in consumer prices.