Inflation cools to 0.8%, slowest in 3½ years

MANILA,Philippines — The rise in the prices of basic goods slowed for the fifth straight month in October, falling to its lowest level in three-and-a-half years, as food and transportation costs continued to decline, the Philippine Statistics Authority (PSA) reported yesterday.

Inflation the measure of the increase in the consumer price index – cooled down further to 0.8 percent in October from 0.9 percent in September and 6.7 percent in October 2018.

PSA officials said the deceleration in the headline rate brings the year-to-date average to 2.6 percent, still well within the government’s target range of two percent to four percent.

The downtrend was mainly attributed to the sustained 0.9 percent decline in the heavily weighted food and non-alcoholic beverage index, as well as the faster decline in the transportation index – by 1.7 percent – in October.

Slower growth was also seen in the indexes of housing and utilities; furnishing and household equipment; as well as health, restaurant and miscellaneous goods and services.

Faster increases, meanwhile, were seen in the indices of alcoholic beverages and tobacco; as well as clothing and footwear. The rest of the commodity group retained their previous month’s annual rates.

Price declines were most significant for main food commodities such as rice, corn and vegetables.

National Statistician Dennis Mapa said the continued influx of rice imports caused rice prices to decline further by 9.7 percent in October from an 8.9 percent drop in September.

This marks the sixth month of negative inflation for the staple and is the weakest pace of growth since 1995.

In transport, extended decline was seen in the prices of petroleum and fuels for personal transport equipment to 10 percent from a decline of 8.1 percent in September. Similarly, extended negative growth was seen for domestic airfare to 13.4 percent from 9.5 percent in September.

Inflation in Areas Outside National Capital Region (AONCR) fell further to  0.7 percent in October from 0.9 in September and 6.8 percent in October 2018.

The headline rate for NCR, however, rose to 1.3 percent in October from 0.9 percent in September but was still lower than 6.1 percent in October 2018.

Mapa attributed this to the uptick in the prices of meat products in Metro Manila because of the  African swine fever (ASF) outbreak.

Aversion to pork and pork products have caused prices of chicken and beef to accelerate in the metro.

The same trend was seen in Region 3 (Central Luzon) that registered the highest inflation of 2.3 percent in AONCR in October.

“Two regions were seen to have higher prices of food, particularly meat. There has been an uptrend in the prices of chicken and beef in Metro Manila and Region 3. So these are the two regions right now that are affected by ASF,” said Mapa in a briefing yesterday.

Meat prices rose by 2.7 percent in October from 2.4 percent in September.

“We are seeing this will continue because initial data in November is still showing upward trend, particularly chicken,” he said.

In Malacanang, presidential spokesman Salvador Panelo attributed the easing of inflation to government’s policies and vowed to continue monitoring prices as the holiday season approaches.

“This positive development is a testament that (President Duterte’s) strong political will, together with his economic team’s sound and working macroeconomic policies and measures, contributed to the downward trend of prices,” he said in a statement.

Meanwhile, the Bangko Sentral ng Pilipinas (BS) said a pickup in inflation can be expected in the last two months of the year as the headline rate likely bottomed out in October.

“The latest inflation outturn is consistent with the BSP’s prevailing assessment that inflation has likely bottomed out in October and could start to pick up slightly in the remaining months of 2019 as base effects start to dissipate,” BSP said in a statement.

For 2019, the BSP continues to expect inflation to average within the government’s target range, with international crude oil prices already stabilizing.

“Global crude oil prices have started to stabilize following the recent volatility caused by geopolitical tensions in the Middle East. Meanwhile, deepening trade tensions between China and the US along with other countries in the region have raised global economic uncertainty, which pose a downside risk to the inflation outlook,” the BSP said.

“The BSP will continue to keep a close watch over latest economic developments here and abroad to ensure that the monetary policy stance remains consistent with the BSP’s price stability objective while being supportive of economic growth,” the central bank said.

The continued downtrend in inflation had allowed the central bank to deliver three rate cuts this 2019, 25 basis points each last May 9, Aug. 8, and Sept. 26 as part of an easing cycle.

Earlier, BSP Deputy Governor Francisco Dakila said the benign inflation environment, along with the normalization in government spending, will enable the economy to grow close to the lower end of the six percent to seven percent target for 2019.

Central bank officials said they expect gross domestic product (GDP) growth to settle at a range of 5.8 percent to six percent for the third quarter and 6.5 percent for the fourth quarter. - With Mary Grace Padin, Alexis Romero