Finance dep’t expects inflation to have steadied from December

THE OVERALL INCREASE of prices of widely used goods and services likely steadied this month from December, according to a bulletin which the Finance department e-mailed to journalists on Monday, setting the stage for faster inflation expected to mark this year.

“Inflation rate in January may have remained unchanged from that of December of last year” at 3.3%, the Finance department said, even as it would be faster than the 2.7% clocked in January 2017.

The Philippine Statistics Authority is scheduled to report official January inflation data on Feb. 6.

The central bank expects fullyear inflation to average 3.4% in 2018 — past the midpoint of a 2-4% target range — compared to 2017’s actual 3.2%.

Transportation costs rose this month due to the increase in retail pump prices of diesel and gasoline in December and January, according to data provided by the Finance department.

“Inflation of food and nonfood items was steady despite the rise in the transport rate which is a lagged response from last month’s fuel rate hike,” the department said.

Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act that took effect this month, raised excise taxes for petroleum products. However, the actual fuel price hike kicked in around mid-January as the new rates did not apply to old stocks since excise taxes are levied upon importation and not at the point of sale.

The food and non- alcoholic beverages commodity group accounts for the biggest chunk of the consumer price index ( CPI) — the theoretical basket of goods and services used by a typical household that is the basis of inflation computations — at 38.98%, followed by housing, water, electricity, gas and other fuels (22.46%) as well as restaurant and miscellaneous goods and services (12.03%). All the other subgroups have single- digit contributions to CPI.

“Declines in housing, utilities and fuels, clothing and footwear, and recreation and culture all contributed to offset the upward pressure from the transport sector,” the department said.

Inflation in housing, utilities and fuels slowed to 3.5% from 3.8% in December, while that of the electricity, gas and other fuels subgroup slowed to 6.8% from 8.4%.

Aside from fuel, RA 10963 also imposed higher taxes on automobiles and tobacco products, as well as new levies for sugar-sweetened beverages, among other items.

The law also cuts personal income tax rates to increase individuals’ take-home pay in hopes of spurring household consumption that has long been the biggest anchor of the country’s economic growth.

The overall increase in prices of alcoholic beverages and tobacco picked up to 6.7% this month from 6.4% in December, while that of other commodity groups steadied.

“Good economic growth maintains stable prices and in turn, provides stimulus for further growth. This virtuous cycle tempers adverse external pressures arising from petroleum and transport inflation,” the Finance department added.

The Bangko Sentral ng Pilipinas has said that it expects the new taxes to add “less than one percentage point” to overall inflation, hence, keeping overall price movements manageable. —