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Fuel, utilities prices stoke February inflation to 2.5%


(Updated 2:19 p.m.) Inflation quickened a bit in February from a month earlier as fuel prices and household utility rates went up, the Philippine Statistics Authority (PSA) reported on Thursday.
 
Consumer prices accelerated to 2.5 percent, compared with 2.4 percent in January, but were much slower from 4.1 percent a year earlier, PSA data showed.
 
While prices moved a bit faster last month, the February inflation rate was within the Bangko Sentral ng Pilipinas' forecast of 2.2 percent to 3 percent.
 
It is also within the full-year inflation target of 2 to 4 percent this year set by the Development Budget Coordinating Committee (DBCC).
 
In a phone interview, Bank of the Philippine Islands economist Nicholas Mapa said the latest inflation data reflects the earlier projections of analysts and economists.
 
"It's fairly within expectation on the back of slow increases in prices of oil, transport," he said.
 
The PSA said there were mixed year-on-year movements among commodity groups during the month.
 
"While negative annual rates were still observed in the housing, water, electricity, gas and other fuels and transport indices, these rates were lesser compared to those in January," it said.

The uptick in petroleum prices and higher utility rates were offset by the slow increase in food prices," the the National Economic and Development Authority (NEDA) said in a separate statement. 
 
NEDA director general and Economic Planning Secretary Arsenio M. Balisacan attributed the moderate rise in inflation to the supply chain and a relatively stable peso in the first two months of the year.
 
“There were no new major economic shocks such as adverse weather conditions. The supply chain also normalized, partly due to the easing of port congestion. The peso likewise remained relatively stable due to the country’s strong external position,” he said.


Oil prices, utility rates
 
Last month, the Manila Electric Company increased electricity rates by P0.84 per kilowatt hour citing higher charges and the added cost of renewable energy under the Feed-In Tariff scheme.
 
Also, Philippine oil companies have raised pump prices during the month, reflecting the rebound in crude in the international market.

NEDA said the increase in oil prices during the month were still significantly lower than in the second half of 2014. 
 
"The recent increase in oil prices was the result of cutbacks in the production and exploration of international energy firms triggered by soft oil prices," Balisacan said.
 
"Outlook for prices in the medium term, however, remains modest given a backdrop of strong world crude oil supply growth and weak global demand," he noted.
 
A water rate increase by Maynilad Water Services Inc. remains unenforced even after the International Appeals Panel upheld a 9.8-percent increase in the 2013 average basic water rates.

NEDA said the increase in transport services to 3.3 percent in February from 1.5 percent in January came after the fare increase for MRT and LRT were enforced, citing this development was observed in the National Capital Region.
 
On the other hand, food prices continued to drop in February, from 5.6 percent to 4.9 percent, reflecting softer upward adjustments in the indices of rice, meat, and vegetables.
 
The favorable outlook on the production of agricultural commodities, particularly palay and corn, should help ease some more the price pressures in the coming months, Balisacan noted.
 
However, the lingering possibility of El Niño in the first quarter of 2015 poses inflationary risks in the immediate term, the Cabinet secretary noted.
 
"Programs to increase productivity and ensure the sufficiency in the supply of key commodities are needed. Likewise important is addressing the looming power woes and creating better logistics supply chains to reduce production and transport costs," Balisacan said.
 
Still quite slow

While the underlying trend in inflation shows acceleration, Mapa noted the pace of consumer prices is still quite slow.
 
"Maybe we've seen the bottom in January, but the latest numbers are still very far from the upper end of the target," he said.
 
"With comments by BSP as neutral – but more on the hawkish side – market has factored this in," he added.
 
Last month, BSP Deputy Governor Diwa Guinigundo said the central bank can afford to leave interest rates unchanged for some time with inflation expected to settle within target for this year and next. 
 
In its February 12 meeting, the policy-setting Monetary Board kept the rates steady. Policy rates were last tweaked by 25 basis points in October 2014.
 
Inflation dropped to a 17-month low in January as oil, transport and utilities prices went down, the Philippine Statistics Authority (PSA) reported early last month. – VS, GMA News
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