Cheaper food prices likely cooled Jan. inflation to 2.8%-3.2%

Security Bank Corporation believes inflation last month likely slowed from 2.8 percent to 3.2 percent due to cheaper food prices which could be partly offset by higher wages of consumers.

These figures are similar to the 2.8 percent to 3.6 percent forecast of the Bangko Sentral ng Pilipinas, which is down from the 3.9 percent recorded by the Philippine Statistics Authority in December.

Food and non-alcoholic beverages is a major inflation factor as it accounts for over 50 percent of all the items in the consumer price index, according to the statistics authority.

It reported that the prices of this commodity group slightly rose to 7.4 percent in December from 7.2 percent in November.

Further slowdown

“Better food supply suggests potential for further slowdown in coming months,” Security Bank chief economist Dan Roces said.

The Marcos administration already created an El Niño task force to address the projected stronger drought in the first half of the year.

Agriculture chief Francisco Tiu Laurel Jr. said 740 out of 843 kilometers of irrigation canals were already repaired and built by the government as of end-November last year.

He added that India approved the rice export of 28 percent of over one million metric tons for this year.

‘Food and nonalcoholic beverages is a major inflation factor as it accounts for over 50 percent of all the items in the consumer price index.’

Stronger appetite

However, Roces said inflation could remain above three percent, driven by stronger appetite for purchases of goods and services due to the recent minimum wage increases nationwide.

The Department of Labor and Employment reported 15 out of the 16 Regional Tripartite Wages and Productivity Boards approved increases ranging from P400 to P1,000.

“While there is potential for a further slowdown in the coming months, global volatility and domestic factors like adverse weather, wage adjustments, and transport costs require close monitoring.

Roces said other inflationary factors include higher sin taxes and possible weaker peso against the US dollar which makes imported goods more expensive.