Inflation in July 2016 remained stable at 1.9 percent and is expected to be manageable for the rest of the year, according to the National Economic and Development Authority (NEDA).
“The steady inflation in July is due to slower increases in food prices, which were able to offset higher electricity charges,” said Socioeconomic Planning Secretary Ernesto M. Pernia.
Core inflation, which excludes selected volatile food and energy prices, likewise remained stable at 1.9 percent in July 2016.
This is within the Bangko Sentral ng Pilipinas (BSP) forecast of 1.5-2.4 percent for July 2016, and median market expectation of 1.9 percent.
“The manageable inflation trend in the first seven months of 2016 is expected to continue for the rest of the year considering the expanding productive capacity of the domestic economy, persistently low oil prices, solid private household consumption and investment, buoyant business and consumer sentiment, and adequate credit and domestic liquidity,” said Pernia who is also NEDA Director-General.
Moreover, headline inflation for January-July 2016 averaged at 1.4 percent, still below the low end of the government’s inflation target of 2.0 to 4.0 percent. “We are thus expecting full-year inflation to average at around 1.98 percent,” he added.
Inflation in the non-food group stayed the same at 0.9 percent. This was mainly driven by slight upticks in prices of housing, water, electricity, gas and other fuels, which were mitigated by slower inflation for other sub-commodities like education and health.
But international oil prices increased from the previous quarter despite global oil prices remaining below 2015 levels. This can be attributed to the prospects of a pickup in global oil consumption, slowdown in crude oil production, and increase in oil supply outages.
Meanwhile, food inflation slowed to 2.8 percent in July from 3.0 percent in the previous month. This was due to a slowdown in inflation among commodity sub-items like meat and vegetables. Prices of milk, cheese, and eggs remained constant, while prices of fish, breads and cereals experienced upward pressures, but not enough to pull down the average price for the overall food group.
Rice inflation slightly increased to 0.4 percent in July 2016 from 0.2 percent in the previous month, which may be attributed to declining harvests as July marks the start of the lean months for rice.
On the domestic front, Pernia said government needs to stay vigilant and prepare for the upcoming La Niña through ensuring the completion of flood control projects, and improving agriculture logistics.
“In order to reduce potential sources of upside price pressures, we also need to ensure that prices of utilities such as electricity and water are stable. Existing petitions for upward adjustment in power prices should be reviewed thoroughly,” he added.