Economists see inflation uptick in November

Cite lower base effects, ASF scare

Economists expect inflation to climb above one percent in November after easing for five straight months to bottom out at 0.8 percent in October.

Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, said inflation likely settled at 1.3 percent in November as last year’s base effects start to dissipate.

“Price levels in November are expected to rise as the base effect of higher inflation level last 2018 starts to dissipate. While October 2019 recorded a year low of 0.8 percent, it is expected an uptick may occur due to lower base effects year-on-year,” he said.

Asuncion said food prices may have risen due to weather-related reasons and the continuing impact of the African swine fever on pork products.

Another factor for inflation uptick, Asuncion said is higher consumption demand in general as Christmas draws near.

The Aboitiz-led bank sees inflation averaging 2.4 percent this year after shooting up to 5.2 percent last year from 2.9 percent in 2017. Inflation exceeded the two percent to four percent target of the Bangko Sentral ng Pilipinas (BSP) due to elevated oil and food prices, particularly rice, as well as weak peso.

In a text message, Rizal Commercial Banking Corp. economist Michael Ricafort said inflation picked up to 1.2 percent in November due to diminishing inflation base or denominator effects.

It would be recalled that inflation slowed down to six percent in November last year after peaking at 6.7 percent in September and October last year due to elevated oil and food prices.

For this year, inflation averaged 2.6 percent from January to October after it eased for five straight months to a 43-month low of 0.8 percent in October from 0.9 percent in September.

“Diminishing inflation base effects starting November 2019 may mathematically lead to slight uptick in year-on-year inflation rate in the coming months but still considered relatively low or benign (assuming all other factors are the same),” Ricafort said.

On the other hand, Security Bank chief economist Robert Dan Roces said inflation averaged 1.3 percent in November as higher demand at the onset of the holiday season caused price spikes for certain goods and services.

The price spikes offset the strength of the peso against the US dollar this month as it made imports less expensive, he said.

“Our estimate also validates the view that inflation levels in October have bottomed-out relative to 2018’s peak. Moving forward, we expect inflation to be at or slightly below two percent by December, and our 2019 average estimate is 2.5 percent,” Roces said.

The BSP’s Department of

Economic Research sees inflation ranging from 0.9 percent to 1.7 percent in November amid upward price pressures including the increase in electricity rates as well as higher prices of gasoline, LPG, and selected food items.

On the other hand, the BSP said lower domestic prices as well as the strengthening of the peso could temper inflation in November.

The benign inflation environment and lower than expected gross domestic product (GDP) growth have allowed the central bank’s Monetary Board to slash interest rates by 75 basis points

this year, partially unwinding a tightening cycle that saw benchmark rates rise by 175 basis points last year.

It has also lowered the reserve requirement ratio for big- and mid-sized banks by 400 basis points and for small banks by 200 basis points to free up more funds to boost economic activity.

BSP Governor Benjamin Diokno earlier said the central bank has not totally closed its doors to another rate cut before the end of the year after taking a prudent pause last Nov. 14 to assess the impact of previous monetary actions.