Philippines April inflation slows to 16-month low of 3% on drop in food prices

08, May. 2019

MANILA, NNA – The year-on-year rise in inflation in the Philippines slowed to a 16-month low of 3.0 percent in April on lower food prices as the government implemented a law easing restrictions on rice imports to avoid the supply shortage that spiked consumer prices last year.

Looking ahead, inflation could rise again on volatile crude oil prices and upward pressure on food prices caused by prolonged dry weather.

The Philippine Statistics Authority (PSA) released its monthly Consumer Price Index report on Tuesday.

Key points:

―― The pace of y/y increase in the overall consumer price index for April decelerated to 3.0 percent from 3.3 percent in March, coming in slightly lower than the median market projection of 3.1 percent. That compared with 4.5 percent in April 2018. The CPI rose 3.6 percent for the year to date, staying within the official 2019 inflation target of 2 to 4 percent. The 3.0% rise was the lowest since December 2017 (+2.9 percent).

―― The tamed inflation is due to a slower annual increase in the heavily weighted food and non-alcoholic beverages index, which was at 3 percent. Retail price hikes in key food items such as rice, meat and fish slowed further.

―― Excluding selected food and energy items, core inflation also dropped to 3.4 percent from 3.5 percent in March.

―― In a month-on-month comparison, the seasonally adjusted headline inflation rate edged up to 0.2 percent in April from 0.1 percent the previous month.

―― “The continued low inflation of rice can be attributed to the stable rice supply in the country, with more imported rice expected to arrive in the country as the Rice Liberalization Act takes effect,” Socioeconomic Secretary Ernesto Pernia said in a statement. The law is expected to keep prices of the staple low and more affordable, primarily benefitting low-income households, which are heavy consumers of rice.

Takeaway:

―― The Philippine central bank is expected by some market participants to shift to easing at its next monetary policy meeting on Thursday in light of lower inflation. Seeing inflation under control, the bank left its key overnight interest rate at 4.75 percent at the past two meetings in February and December after raising it by 25 basis points to the current level in November.

―― The government said a prolonged El Nino weather phenomenon and a continued increase in global crude oil prices could push up consumer prices in the near term, while the central bank noted that slower global growth could also exert downward pressure on inflation.

―― To mitigate the impact of unstable global oil prices, Pernia said the government should use cash handouts and monthly fuel vouchers for public transport drivers.