November 7, 2017

Faster price adjustments in food and fuel caused inflation to accelerate in October 2017, the National Economic and Development Authority (NEDA) said.

Based on a report of NEDA-attached agency Philippine Statistics Authority (PSA), headline inflation increased to 3.5 percent in October 2017 from 3.4 percent the previous month.

This is within the forecast of the Bangko Sentral ng Pilipinas (BSP) of 3.2 to 3.7 percent and is comparable with median market expectations of 3.5 percent.

Core inflation, which excludes select volatile food and energy prices, slightly eased to 3.2 percent from 3.3 percent in September.

“We still expect full year inflation to stay within our target of 2.0 to 4.0 percent. However, upside risks become more prominent as the holiday season approaches. This warrants close monitoring of the rising prices in domestic petroleum as well as utility rates,” Socioeconomic Planning Secretary Ernesto M. Pernia said.

For the food subgroup, inflation was up to 3.8 percent from 3.7 percent the previous month because of faster price increases in corn, meat, and vegetables.

“Higher prices for corn and vegetables may be traced still to the lingering effects of Typhoon Jolina, Tropical Depression Maring, and Typhoon Paolo. On the other hand, higher prices of meat can be attributed to the import ban on Brazilian meat products, affecting domestic meat production costs,” the Cabinet official said.

Pernia added that the government needs to be consistently on the watch for developments in climate conditions, considering that weather patterns and events have a direct impact on food supply and prices.

“We must also ensure a stable and sufficient level of the country’s rice stock. This is an important policy concern given that rice comprises a sizable portion of the CPI basket. Deciding the appropriate timing of rice importation is vital to avoid supply disruptions. There is also a need to amend domestic laws to end the quantitative restrictions on rice,” Pernia added.

Meanwhile, non-food inflation reached 3.2 percent in October 2017 from 3.1 percent the previous month, and from 1.5 percent the same period last year.

One of the reasons is the surge of domestic prices for liquefied petroleum gas (26%), as well as diesel (22.8%) and kerosene (13.2%) in October 2017.

Pernia said that crude oil prices may increase in the near-term due to the continuing increase in global oil demand.

Based on the October 2017 Commodity Markets Outlook report of the World Bank Group, energy prices are projected to rise by 4 percent in 2018.

“Upbeat consumer spending this holiday season is also expected to push prices up. Within the near-term, higher utility rates, increasing domestic fuel prices, and the depreciation of the peso may further exert upward pressures on inflation,” said Pernia.