Inflation ends slowdown, picks up to 1.3% in November

MANILA, Philippines — Prices of basic goods and services rose at a faster rate in November, ending five straight months of a slowdown, fuelled by the sharp growth in the prices of alcoholic drinks and tobacco as well as oil and electricity, the Philippine Statistics Authority (PSA) said in a report yesterday. 

Headline inflation rose to 1.3 percent in November after bottoming to a 43-month low of  0.8 percent in October, and coming from a high base of six percent in November 2018. 

This brings the 11-month average to 2.5 percent, still within the government’s two to four percent target range for the year. 

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said in a text message the central bank’s Monetary Board would consider new data and potential risks from the higher inflation at its rate-setting meeting scheduled on Dec. 12.

Diokno said inflation last month was well within the BSP forecast of between 0.9 and 1.7 percent and consistent with the prevailing assessment that the consumer price index had bottomed out in October.

Increased demand during the holiday season, as well as the base effect of the higher taxes on alcoholic beverages and tobacco caused the index for the commodity to accelerate by 17.6 percent in November, from 16.5 percent in October, the PSA said.

“This is actually due to the excise tax which started in July last year. The base is last year and we are comparing it to that,” said PSA chief Dennis Mapa.

He said that while there was increased demand for such products during the holiday season, the November growth rate is still largely attributable to the excise taxes. 

Also driving inflation higher were the growth in the indexes of housing and utilities, which accelerated to 1.2 percent in November from 0.6 percent in October, as well as spending for health which rose to 3.1 percent in November from 2.9 percent in October. 

The index of food and non-alcoholic beverages, which used to be the main driver of inflation, had zero growth in November, a reversal of the 0.9 contraction in October. 

This reversal was caused mainly by the continued rise in the prices of chicken, beef, fish and eggs still due to the prevalence of African swine fever (ASF). 

Rice prices, however, still contracted by 3.3 percent in November coming from negative 9.7 percent in October, making it the seventh month of negative growth in rice prices. 

Mapa said the growth in consumer prices can be expected to pick up slightly in December because of the continued increase in the prices of meat and fish as well as in the excise tax effects on alcoholic beverages and tobacco. 

“We expect that it will slightly increase in December especially now that in the initial data for the first week (of December), we see that fish prices are increasing. Chicken prices also continue to rise so this may spread into the food group,” he said. 

“But I think the average for the year will be around 2.5 percent. We will have to track the food group,” he added. 

The National Economic and Development Authority (NEDA) said there is a need to ensure adequate food supply to manage inflationary risks. 

“We expect the 2019 full-year inflation to settle within the government’s target. However, there remains upside risks to inflation such as the impact of Typhoon Tisoy and ASF. It is also crucial to ensure sufficient supply of key food items in managing the country’s overall inflation, especially with the anticipated surge in demand this holiday season,” said NEDA Undersecretary Adoracion Navarro.

She added that the recovery and rehabilitation efforts in the disaster-stricken areas should be prioritized.

Based on it assessment last Nov. 14, the Monetary Board expects inflation to ease to 2.4 percent this year from 5.2 percent last year before picking up to 2.9 percent in 2020 and 2021.

“The risks to the inflation outlook are on the upside for 2020, but are tilted to the downside in 2021. The volatility in global oil prices and the potential impact of the African swine fever outbreak are the main upside risks to inflation. Meanwhile, the impact of global trade and policy uncertainty as well as geopolitical tensions continue to be the main downside risks to inflation,” the BSP said. - With Lawrence Agcaoili