DOF sees inflation hitting fresh 5-year high in June

The rate of increase in consumer prices likely accelerated further last month, hitting its fresh highest level in more than five-years owing to higher costs of food and petroleum products, the Department of Finance (DOF) said.

Based on the latest DOF economic bulletin, the country’s inflation may have inched up to 4.9 percent in June, a significant jump compared with 2.5 percent in the previous year and faster than May’s 4.6 percent rise.

Finance Undersecretary and Chief Economist Gil S. Beltran said the inflation adjustment month-on-month was due mainly to education, which rose 2.43 percent ahead of the opening of classes.

Beltran also cited the 2.27 percent increase in vegetable prices “that usually accompanies incessant rains at the onset of the wet season” contributed to the rise in inflation.

Year-on-year, the finance official said that food prices saw an uptick last month mainly due to higher costs of vegetables, while inflation of fish and rice moderated to 0.11 percent and 0.1 percent, respectively, compared with the previous month.

“Price increase from sin products continues to be double digit YOY [year-on-year] even as the MOM [month-on-month] rate plunged to 0.3 percent from 0.81 percent last May,” Beltran noted.

For the June inflation rate, sin products contributed as much as 0.46 percentage point, the DOF official said.

“Non-food price also sees 0.33 percent month-on-month increase, driven by education and petroleum products but tempered by the decline in electricity rates. The R0.90-R1 per liter price rollback last June 25 likely came after the survey,” Beltran said.

The DOF’s inflation forecast is at the high-end of the Bangko Sentral ng Pilipinas’ (BSP) projection of around 4.3 percent to 5.1 percent for the month.

“Upward price pressures from rice and other agricultural commodities due to weather-related disruptions as well as the increase in LPG prices could be partly tempered by the reduction in fuel prices and electricity rates in Meralco-serviced areas,” the BSP earlier said.

After cutting key benchmark rates by 50 basis points during its May 10 and June 20 Monetary Board policy meetings, the BSP now estimates 4.5 percent inflation average for 2018 from its previous forecast of 4.6 percent.

For 2019, the forecast is 3.3 percent which was also lower than its earlier projection of 3.4 percent.

The DOF reiterated that the BSP “will continue to keep a watchful eye on the risks to the inflation outlook to help ensure price stability conducive to a balanced and sustainable growth of the economy.” The June inflation rate will be released on July 5.