In­fla­tion slows for first time in 2018

Business World - - Front Page - By Melissa Luz T. Lopez Se­nior Re­porter

IN­FLA­TION eased for the first time this year in Novem­ber to post the slow­est rate in four months, helped by milder in­creases in food prices, the Philip­pine Statis­tics Au­thor­ity (PSA) re­ported on Wed­nes­day.

Head­line in­fla­tion dropped to six per­cent last month from a nine-year peak of 6.7% in Septem­ber and Oc­to­ber, the PSA said yes­ter­day. This, how­ever, is still faster than the three per­cent clocked in Novem­ber 2017.

The lat­est in­fla­tion pace is lower than the 6.3% me­dian in a Busi­ness World poll last week that matched the Fi­nance de­part­ment’s es­ti­mate, but falls near the lower end of the 5.8-6.6% range given by the Bangko Sen­tral ng Pilip­inas (BSP).

In a press brief­ing yes­ter­day, Na­tional Statis­ti­cian Lisa Grace S. Ber­sales noted “slow­downs” in the year-on-year in­creases of food and non-al­co­holic drinks, which eased to eight per­cent in Novem­ber from 9.4% in Oc­to­ber; hous­ing, wa­ter, elec­tric­ity, gas and other fu­els to 4.2% from 4.8%; and com­mu­ni­ca­tion to 0.4% from 0.5%.

In par­tic­u­lar, food in­fla­tion de­clined across the board. Rice prices rose by 8.1% over­all in Novem­ber, slower than the 10.7% pace clocked the pre­ced­ing month. In­cre­ments of fish prices also eased to 12.5% from 13.8%, meat to 6.3% from 7.5%, and veg­eta­bles to 11.5% from 15.8%.

The loom­ing re­place­ment of quota re­stric­tions for rice im­ports with reg­u­lar tar­iffs, in ef­fect lib­er­al­iz­ing im­por­ta­tion of the sta­ple, is ex­pected to cut re­tail prices by P7 per kilo­gram and head­line in­fla­tion by as much as 0.85% next year.

Trans­port costs — which economists ex­pected to pick up faster due to higher jeep­ney and bus fares which took ef­fect in Novem­ber — stead­ied at an 8.9% rise to match Oc­to­ber’s pace. “For trans­port, you have sev­eral items there… Even if jeep­ney fare in­creased, all the oth­ers reg­is­tered lower in­fla­tion in­creases,” Ms. Ber­sales ex­plained.

In­fla­tion of pe­tro­leum and fu­els for per­sonal trans­port eased to 19.8% in Novem­ber ver­sus 30.3% the pre­ced­ing month, which helped off­set faster in­creases in jeep and bus fares at 11.6% and 2.6%, re­spec­tively.

Do­mes­tic air fares posted a softer over­all in­crease of six per­cent from 8.4% in Oc­to­ber, ac­cord­ing to PSA data.

Reg­u­la­tors on Mon­day an­nounced a pro­vi­sional roll­back in base pub­lic util­ity jeep­ney fare in Metro Manila, as well as cen­tral and south­ern Lu­zon to P9 from P10 for the first 4 kilo­me­ters.

On the flip­side, an ad­di­tional P2 per liter in­crease in fuel ex­cise taxes will take ef­fect next month, although author­i­ties have said that this will have a “min­i­mal” im­pact on over­all prices. BSP Gover­nor Nestor A. Espe­nilla, Jr. said last week that this has al­ready been fac­tored in the cen­tral bank’s fore­cast for the com­ing year.

The PSA said Novem­ber data af­firms the “de­creas­ing trend” in the in­fla­tion rate, with the month-on­month pace even post­ing a 0.3% de­cline.

Ms. Ber­sales said this is the fastest monthly drop since Fe­bru­ary 2016.

Also yes­ter­day, Mr. Espe­nilla said these num­bers are “very en­cour­ag­ing,” as it con­firms that in­fla­tion is on track to re­turn to the 2-4% tar­get by 2019 de­spite the big miss this year.

“Strong mon­e­tary ac­tion has sig­nif­i­cantly re­in­forced the anti-in­fla­tion process through the ex­pec­ta­tions route and a firmer peso. How­ever, its more di­rect im­pact on eco­nomic ac­tiv­ity will take a longer time to take hold,” the cen­tral bank chief said.

But he flagged the need to mon­i­tor core in­fla­tion — which strips out volatile food and en­ergy prices — which has been pick­ing up over the last few months. Novem­ber core in­fla­tion climbed to 5.1% from 4.9%.

PSA noted that the in­crease in prices of widely used goods slowed across much of the coun­try ex­cept Cen­tral Lu­zon, where it stead­ied at 4.4% from Oc­to­ber.

In­fla­tion dropped to 5.6% in Metro Manila from 6.1% in Oc­to­ber, while over­all price hikes sim­i­larly dropped to 6.2% from 6.8% in ar­eas out­side the Na­tional Cap­i­tal Re­gion.

Still, 10 of the coun­try’s 17 re­gions bared above-av­er­age in­fla­tion, namely: Ilo­cos Re­gion (eight per­cent), Ca­gayan Val­ley (seven per­cent), MIMAROPA (7.7%), Bi­col Re­gion (8.9%), Western Visayas (6.7%), Zamboanga Penin­sula (7.2%), North­ern Min­danao (6.9%), Davao Re­gion (6.3%), SOCCSKSARGEN (6.9%) and the Au­ton­o­mous Re­gion in Mus­lim Min­danao (7.7%).

Michael L. Ri­cafort, econ­o­mist at Rizal Com­mer­cial Bank­ing Corp., said the “dra­matic” drop in world crude prices from Oc­to­ber’s three-year peak plus an ap­pre­ci­at­ing peso made the case for softer in­fla­tion, to­gether with im­prov­ing food sup­ply. “Thus, the de­cel­er­a­tion in in­fla­tion rate could be sus­tained in the com­ing months, as­sum­ing all other fac­tors are the same,” Mr. Ri­cafort said via e-mail.

De­spite Novem­ber’s slower pace, year-to-date in­fla­tion still clocked faster at 5.2%, short of the cen­tral bank’s 5.3% full-year fore­cast for 2018.

Lon­don-based Cap­i­tal Eco­nom­ics said the lat­est in­fla­tion data gives the BSP space to keep bench­mark in­ter­est rates steady at its Dec. 13 pol­icy meet­ing, the last for 2018. This fol­lows five rate hikes since May worth a to­tal of 175 ba­sis points (bp). “Our fore­cast is that in­fla­tion will drop back steadily over the com­ing months and re­turn to the BSP’s 2-4% tar­get range by around the mid­dle of next year. If we are right, then fur­ther rate hikes by the cen­tral bank are un­likely,” said Alex Holmes, Cap­i­tal Eco­nom­ics’ Asia econ­o­mist.

Mean­while, HSBC Global Re­search said that price pres­sures “have not com­pletely dis­si­pated” given a hike in min­i­mum wages that took ef­fect Novem­ber as well as de­mand-side fac­tors. In its view, the BSP may still con­sider a 25bp rate in­crease next quar­ter.

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