May inflation seen at 1.4%

MANILA, Philippines – Higher food prices likely pushed up consumer prices last month, although the average may still have fallen below this year’s official government target, the chief economist of the Department of Finance said.

Inflation, as measured by consumer price index (CPI), may have slightly accelerated to 1.4 percent in May from 1.1 percent the previous month.

The figure is, however, faster than the 1.6 percent in the same period last year. For the first four month, inflation averaged 1.1 percent, below the two- to four-percent target for 2016.

“The below-target forecast can be traced (from) comparatively lower fuel and electricity prices that the country still enjoys,” Finance Undersecretary Gil Beltran said in an economic bulletin.

“An uptick in inflation rate, however, may be attributed to an increase in food prices, particularly vegetables,” he added.

Beltran’s outlook is within the central bank’s 1.1 to 1.9 percent forecast range for May.

According to Beltran’s forecast, CPI may have gone up at nearly all its sub-indices, except housing, utilities and fuels which is seen to have experienced declining prices at an average of 0.8 percent.

In May, Meralco announced it will trim its over-all rates by P0.70 per kilowatt hour as a result of lower generation costs from power suppliers.

On the flip side, Beltran said the sub-index of food and non-alcoholic beverages likely led the price increase with 1.9-percent inflation, up from 1.6 percent in April.

According to the basket of goods and services used to measure inflation, the sub-index accounts for 39 percent of total CPI.

Beltran said other sub-indices are seen also to contribute to faster inflation in May. Among others, restaurant and miscellaneous services and transport sub-indices could have accelerated to 2.2 percent and 0.4 percent, respectively.

The former accounts for 12.03 percent of CPI, while the latter corners 7.81 percent, making them the third and fourth lead inflation driver.

Despite faster inflation, Beltran said economic growth, which hit a faster-than-expected 6.9 percent in the first quarter, is not under threat from higher prices as it remains below target.

Strong growth and low inflation, in turn, had allowed the central bank to keep policy rates steady for 13 straight meetings, making credit cheap to finance more expansion.

“This low rate allows room for monetary policy to sustain rapid economic growth,” Beltran said.