Inflation remains steady at 4.9% in August – PSA

Published September 5, 2014 10:37am

(Updated 4:13 p.m.) Inflation in August was steady as the slower rise in transport costs offset increases in food and utilities, the Philippine Statistics Authority (PSA) said Friday.

Consumer prices accelerated by 4.9 percent in August, the same rate in July but faster than the 2.1 percent a year earlier, PSA data showed.

The inflation data is a slight surprise for the market, as expectation was at 5 percent, Bank of the Philippine Islands lead economist Emilio Neri Jr. told GMA News Online.

But with the upward pressures on prices, Economic Planning Secretary Arsenio M. Balisacan said the overall market expectations on inflation remain well-anchored.

He cited the impact of Monetary Board’s recent move to hike interest rates by 25 basis points to 3.75 percent for the overnight borrowing and 5.75 percent for the overnight lending.

“Such policy action by the Bangko Sentral ng Pilipinas is expected to put a brake on potential price pressures,” Balisacan, who is also the NEDA director-general, said.

The latest inflation rate brought the year-to-date average to 4.4 percent – at the upper end of the government target of 3 to 5 percent.

"Mixed movements in the annual growths among the commodity groups were noticed during the month," the PSA said.

Bangko Sentral says August core inflation uptick to weigh on policy meet

Bangko Sentral ng Pilipinas (BSP) will consider the uptick in annual core inflation in August, which rose to 3.4 percent from 3.0 percent in July, in reviewing policy settings at next week's meeting, central bank Governor Amando Tetangco said on Friday.

Headline inflation in August was steady at 4.9 percent, the statistics agency said, but core inflation climbed to its highest in at least six months.

Analysts expect the BSP to raise its overnight borrowing rate, or the rate on its short-term special deposit accounts (SDAs), or both, by another 25 basis points at its meeting on Sept. 11.

The central bank raised its policy rate in July – the first in three years – to 3.75 percent to stay on top of rising prices. The SDA rate is at now 2.25 percent. – Reuters

The food and non-alcoholic beverage index rose due to the tight supply of chicken, fish and other seafood products due to Typhoon Henry in July, while the housing, water, electricity, gas and other fuels index, rose mainly on higher electricity rates, it said.

Food inflation increased by 8.3 percent in August 2014, coming from faster year-on-year growth in almost all major food items during the period, the National Economic and Development Authority (NEDA) said in a separate statement.

Poultry growers in Region 4A (Cavite, Laguna, Batangas, Rizal, Quezon) or CALABAR Zone were unable to fill the demands of wholesalers in Metro Manila after another typhoon, Glenda – also in July – damaged roads and farms.

Typhoon Henry, on the other hand, further enhanced the Habagat and made it difficult for fisherfolk to catch fish and other seafoods.

Electricity bills went up by P0.31 per kilowatt hour as power plant outages caused by Typhoon Glenda forced Manila Electric Company (Meralco) to source more expensive electricity from the spot market.

These were all offset by the decrease in the indices of transport, alcoholic beverages and personal care, the PSA said.

"Price rollback in gasoline and diesel and the slower monthly hikes in alcoholic beverages and selected items for personal care softened the faster rates registered in the prices of footwear items and higher charges in electricity rates," it said.

Food supply

Balisacan said food prices are expected to normalize as government steps up rice importation.

The start of harvest for main season corn – to be completed by mid-September – is also seen to provide additional buffer to supply, he added.

“Given the potential upside pressures linked to possible increases in food and oil prices and pending petitions for adjustments in utility rates, short-term interventions should focus on ensuring supply sufficiency of key commodities,” Balisacan said.

He added that in the case of rice, timely importation to augment local production is warranted, given the expected 1.2 percent decline in domestic palay production in the second half of 2014.

“The relatively high probability of El Nino towards the fourth quarter of 2014 implies that the government should intensify efforts to implement programs that will help the areas which are highly and moderately vulnerable to the adverse impact of a dry spell,” the Cabinet secretary said.

Pest control measures such as the eradication of “cocolisap” should also be accelerated, given that coconut products’ relatively strong association with the production of many food and non-food products for domestic consumption.

But if the food supply and the port congestion issues are not resolved, Neri said is a different story.

"If the rice problem and port congestion persists, we're still far away from bringing the inflation down, it will stay near 5 percent," he said. – Danessa O. Rivera/GMA News

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