Food prices drag Nov. inflation lower

LOWER food prices caused inflation to ease in November after four straight months of picking up, the government said yesterday.

The Philippine Statistics Authority (PSA) said headline inflation slowed to 3.3% last month from October’s 3.5%, but was still faster than the 2.5% clocked in November last year.

The preliminary result fell within the Bangko Sentral ng Pilipinas’ (BSP) 2.9-3.6% range for the month and was faster than the 3.2% median estimate in a poll Business World conducted last week.

With the November result, year-to-date inflation settled at 3.2%, matching the BSP’s fullyear forecast and keeping within its 2-4% target band for 2017.

In a statement, the National Economic and Development Authority ( NEDA) attributed November’s easing to lower prices of several food items, with the food and non-alcoholic beverages sub-index slowing to 3.2% in November from October’s 3.6%, the lowest since October 2016.

Food- alone inflation slowed to 3.3% during the month, down from October’s 3.8% and November 2016’s 3.5%.

“This can be attributed to lower prices of vegetables, sugar, jam, honey, chocolate and confectionery, fruits, oils and fats, and rice,” the NEDA statement read.

Core inflation — which excludes volatile food and energy prices — was also at 3.3%, slightly faster than the previous month’s 3.2% and past year’s 2.4%.

“We are starting to see year-onyear price declines for ampalaya, cabbage, carrots, tomato, white potato, and imported garlic in the National Capital Region. This signifies that supply is starting to stabilize again,” Socioeconomic Planning Secretary Ernesto M. Pernia said.

Slower annual increments were also observed in the indices of alcoholic beverages and tobacco (6.1% from October’s 6.8%),

clothing and footwear (1.8% from 1.9%) and education (2.2% from 2.3%).

“Inflation fell in November as the appreciation of the peso and better weather conditions in the country resulted in a slower increase in the prices of food, beverages and tobacco,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (Landbank).

“In particular, there was a marked slowdown in the prices of fruits and vegetables, with the latter showing a decline in cost from previous year’s level. The softening in domestic inflation was tempered by higher oil prices, which contributed to higher upticks in the costs of transport, fuel, and electricity,” he added.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (Union Bank), shared this view, saying: “With core inflation moving faster, a notable slowing of price growth came from the heavily weighted food and non-alcoholic beverages.

“Together with softer price increases in crude oil, the prices of these basic commodities were toned down by the peso’s recent strength impacting particularly imported goods,” he added.

Mr. Asuncion also noted that the easing of inflation was caused by “largely favorable” weather all-year-round, resulting in fewer supply shocks.

The peso has returned to the P50- per- dollar level since mid-November after breaching the P51-per-dollar level in the third quarter. The local currency’s recovery was attributed to the faster-than-expected 6.9% economic growth in the third quarter and the increased optimism following the approval of the tax reform plan in the Senate.

“Inflation during the last eleven months suggests that the fullyear average might settle slightly above midpoint, but will still be well within our target of 2- 4%. This already considers expected price spikes owing to holiday season spending this December,” NEDA’s Mr. Pernia said.

In addition, higher international crude oil prices brought by production cuts from the Middle East and higher electricity and fuel prices “will also continue to exert pressure on headline inflation in the near-term,” Mr. Pernia added.

BSP Governor Nestor A. Espenilla, Jr. was of the same view, saying in a text message to reporters that the inflation print “was expected” following October’s peak.

“We’re still on track with the 3.2% inflation [target] for 2017…” Mr. Espenilla said.

For Union Bank’s Mr. Asuncion, inflation is expected to settle within 3.2-3.5% this month, saying that inflation levels from November to December “usually rise” due to stronger domestic demand amid the holiday season.

On the other hand, Landbank’s Mr. Dumalagan forecasted inflation to come in at 3.4%, citing the possibility of a depreciation of the peso amid expectations of another US rate hike when the Federal Open Market Committee meets for the last time this year on Dec. 12-13.