MANILA – Upward price movements in food and energy pushed inflation to 1.5 percent in December 2015 from 1.1 percent in the previous month, according to the National Economic and Development Authority (NEDA). This brought the full-year inflation to 1.4 percent, below the government’s target range of 2.0 to 4.0 percent for 2015.

“Price increases were largely due to the upbeat demand during the holiday season. Inclement weather conditions, primarily Typhoon Nona, also adversely affected agricultural areas, hampering the production, delivery, and transport of products, which in turn pushed up prices” said Economic Planning Secretary Arsenio M. Balisacan.

Nonetheless, this December 2015 inflation was within the Bangko Sentral ng Pilipinas’ forecast of 1.1-1.9 percent for the month and also aligned with the market’s median forecast of 1.5 percent.

“The generally low inflation environment in the past year was expected. It was largely due to favorable supply-side factors such as relatively lower domestic retail prices of corn, oil, and rice, lower international oil prices, and the contraction in the prices of housing and other utilities,” the Cabinet official said.

For December 2015, inflation for the food subgroup accelerated on the back of higher prices of corn, fish, milk, cheese and eggs, which offset the lower prices in heavily-weighted sub-items such as rice, vegetables and non-alcoholic beverages.

Meanwhile, the increase in non-food inflation can be attributed to the slower price declines in housing, water, electricity, gas and other fuels, accompanied by faster price adjustments in transport, health, and recreation and culture.

Prices of electricity, gas, and other fuels also went up with higher electricity generation charge, given the low supply of cost-effective hydropower plants. Transmission charges were also higher as ancillary service increased charges in December 2015.

On the other hand, the global oversupply and record stockpile levels of crude oil has been instrumental in the unabated downtrend of international crude oil prices, as reflected in lower domestic petrol prices.

Core inflation, which excludes selected volatile food and energy prices, increased to 2.1 percent in December 2015 from 1.8 percent in the previous month partly due to a surge in transport, health, and recreation and culture subgroups.

“This indicates stable price increases across an extensive range of consumer items,” said Balisacan, who is also NEDA Director-General.

Balisacan, however, said that for the first months of 2016, the effects of El Niño may lead to higher inflation particularly for food and power. El Niño is expected to peak from November 2015 to January 2016, and gradually weaken starting February 2016.

“Guided by the Roadmap for Addressing the Impact of El Niño or RAIN, accurate determination of food import requirements to avoid scarcity in supply is important to keep inflation stable in the coming months. This also has significant impact on poverty reduction as the poor spend more than half of their budget on food,” said Balisacan.

Balisacan also noted the still unstable energy situation in Mindanao and stressed that on-going power projects, which are expected to be delivered between November 2015 and March 2016, should not be delayed.

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