Food supply woes due to typhoons push up inflation in November

MANILA, Philippines (Updated 1:31 p.m.) — Strong typhoons that flattened vast swathes of farm lands and destroyed crops pushed up the prices of key consumer items in November, hardly reflecting consumer demand finally recovering after being smashed by coronavirus lockdowns.

Inflation, as measured by the consumer price index, accelerated 3.3% year-on-year in November from 2.5% in the preceding month, the Philippine Statistics Authority reported Friday. The latest reading was the fastest rate since April 2019, PSA data showed.

November's outturn surpassed the Bangko Sentral ng Pilipinas' forecast of a 2.4-3.2% uptick for the month. In 11 months, inflation averaged 2.6%, settling within the government's 2-4% annual target.

Speaking to reporters, National Statistician Claire Dennis Mapa said higher food prices due to the onslaught of typhoons — worsened by tight pork supply amid the African swine fever outbreak — put upward price pressures last month. 

Based on latest estimates of the agriculture department, the combined value of damage caused by typhoons Ofel, Nika, Pepito, Quinta, Rolly and Ulysses to the farm sector amounted to P15.3 billion after these deadly storms sliced through Luzon provinces where the bulk of crops distributed elsewhere are harvested.

The food supply shocks were so bad that automatic price ceilings imposed in storm-battered areas barely helped keep inflation in check. Food accounts for 29% of the basket of goods and services used to compute inflation so supply constraints as a result of weather disturbances could have significant impact on prices. 

Meanwhile, Mapa also said that November inflation is not likely to hve gotten a lift from the typical surge in consumer spending ahead of the holiday season, which is a kind of price pick-up that would've been a great news for a government trying to revive a flat-lining consumer confidence as contagion fears keep people indoors.

For the BSP, whose mandate is to ensure price stability, the price increases last month was only temporary, adding that inflation is expected to stay benign amid anemic consumption. "The impact of supply disruptions due to recent typhoons is expected to be largely transitory," Governor Benjamin Diokno said in a statement.

Sanjay Mathur and Kanika Bhatnagar, economists at ANZ Research, agreed with the central bank's assessment, saying the brief price gains are unlikely to convince the BSP from slamming the breaks on monetary policy easing. "The temporary gain in inflation will not derail the accommodative course of monetary policy," they said in an e-mailed commentary.

Food prices up

Broken down, the heavily-weighted food index went up 4.5% on-year in November, a turnaround from 0.5% contraction in October mainly due to faster annual increase in prices of meat (8.2%), fish (5.3%) and fruits (5.6%). Prices of vegetables posted a double-digit spike of 14.6% as tomatoes and onions become expensive, figures showed.

By area, inflation in the National Capital Region picked up to 3.5% annually from 2.5% in the previous month while areas outside the capital saw price growth speed up to 3.3% from 2.5%, with the Bicol Region registering the highest inflation at 5.5%.

According to PSA's Mapa, inflation may cool down in December if food prices stabilizes. "The prices of other commodity groups are not increasing so we can surmise that perhaps if the food items will go down this December, inflation will ease next month," he said.