Inflation up 3.4% in September

MANILA, Philippines — Price increases quickened in September on account of rising food prices, the government’s statistical agency reported on Thursday.

The Philippine Statistics Authority said headline inflation picked up to 3.4 percent last month from 3.1 percent in August and the 2.3 percent recorded in September last year.

“This was primarily due to the 3.6 percent annual growth recorded in the heavily-weighted food and non-alcoholic beverages index,” PSA said.

The result fell within the Bangko Sentral ng Pilipinas’ inflation estimate range of 2.8-3.6 percent and is a tad higher than median market expectations of 3.2 percent.

With the September result, the year-to-date inflation settled at 3.1 percent.

The National Economic and Development Authority (NEDA), the agency overseeing the PSA, said faster price adjustments in food caused inflation to accelerate in September.

“We are still positive that inflation for full year 2017 will settle within the government’s target of 2 to 4 percent. However, we still face several risks to inflation such as higher domestic fuel prices, weaker peso, and minimum wage hike that will be effective today in the National Capital Region,” Socioeconomic Planning Secretary Ernesto Pernia said in a statement.

Excluding select volatile food and energy prices, core inflation similarly picked up to 3.3 percent from August’s 3 percent and September 2016’s 2.3 percent.

According to PSA, contributing to the uptrend were higher annual increments registered in the indices of alcoholic beverages and tobacco at 6.4 percent; clothing and footwear at 2.0 percent; housing, water, electricity gas and other fuels at 3.8 percent; transport at 4.8 percent; and restaurant and miscellaneous goods and services at 2.4 percent.

“The rest of the commodity groups retained their previous month’s rates except for the index of health whose annual gain was slower at 2.3 percent,” PSA said.

For the food group, higher annual add-ons were observed in the indices of corn and other cereals, flour, cereal preparation, bread, pasta and other bakery products.

Price increases were also seen in fish, oils and fats, and vegetables. Meanwhile, the rest of the food groups posted lower annual hikes, with the index of sugar, jam, honey, chocolate and confectionery still posting annual decline at -2.8 percent, PSA said.

“The accelerated adjustments in food, particularly corn, fish, and vegetables, can be partly traced to the lingering effects of Typhoon Jolina and Tropical Depression Maring, which caused damage to agriculture and fisheries in the CALABARZON region, particularly Quezon province,” Pernia said.

“We must continue to strengthen the resiliency of communities not only to support low-income farmers but also to stabilize prices of agricultural commodities,” he added.

“The government needs to closely monitor movements in domestic fuel prices and utility rates. Faster inflation in these sectors will negatively impact the spending capacity of lower-income households for basic necessities like food, and important services such as health and education,” he also said.

In a separate statement, Central Bank Governor Nestor Espenilla Jr. said the BSP still expects inflation environment to be manageable considering the latest assessment of price levels in September.

“Firm domestic economic activity, sufficient liquidity, and well-anchored inflation expectations continue to support current policy settings,” Espenilla said.

“However, BSP will continue to closely monitor emerging economic and financial developments to determine scope for further refinement of policy instruments,” he added.

BSP watches inflation closely to ensure price increases are manageable and that they do not dent economic performance.

Sought for comment, University of Asia and the Pacific (UA&P) economist Cid L. Terosa said the uptick in September’s headline inflation can be attributed to “higher fuel, electricity, gas prices and the weakening of the peso.”

Separately, Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said in an email interview that the impact of heavy rains “might be more pronounced than expected,” leading to a higher increase in food prices.

“Inflation could remain above 3.1 percent in the last three months of the year, especially since the peso might depreciate further as a result of potentially another rate hike from the US central bank. The slow and steady rise in oil costs might also continue to boost consumer prices,” Dumalagan also said.