Index now based on 2018 prices
MANILA, Philippines — Prices of consumer goods continued their slowdown in January, driven by cheaper costs of household utilities, food and restaurant services, the Philippine Statistics Authority (PSA) said yesterday.
The headline inflation or the rate of increase in the consumer price index eased to three percent in January from 3.2 percent in December 2021. This is also lower than the 3.7 percent rate in January 2021.
The latest inflation figures are now using 2018 as the base year. Following the adjustment in the computation and weight of the consumer basket, the January figure is the softest rate since November 2020, but is above the 2.8 percent market consensus.
The adoption of the 2018 base year also resulted in the significant easing of the full-year 2021 inflation rate to 3.9 percent from the earlier 4.5 percent.
PSA head Dennis Mapa said the main sources of deceleration for January were housing, water, electricity, gas and other fuels. These commodities contributed 77 percent to the total inflation.
In particular, liquefied petroleum gas inflation slipped to 18.3 percent from 25.6 percent while electricity declined to 12.6 percent. Restaurants and accommodation services also slowed to three percent last month while alcoholic beverages and tobacco went down to 5.6 percent.
On the other hand, upside pressure came from more expensive transport costs, with transport inflation accelerating to seven percent from 6.1 percent as global oil prices remain elevated at the start of the new year.
Gasoline inflation rose to 28.8 percent while diesel went up to 40 percent.
The heavily weighted food and non-alcoholic beverages, which shared 20.1 percent of the inflation, remained at 1.6 percent. The lower price of meat was offset by the higher costs of other food commodities such as corn, rice and bread.
Meat prices, particularly pork, which have been contributing significantly to inflation, slid to 4.3 percent from 8.7 percent in December.
However, corn inflation surged to 27.7 percent, which Socioeconomic Planning Secretary Karl Chua considers as an emerging issue that underscores the need to promote a more comprehensive reform program for the whole livestock value chain.
Chua called for the timely passage of the proposed Livestock Development and Competitiveness Bill to boost the productivity of the country’s livestock sector and value chain.
Among the major provisions of the bill is the updating of the corn industry roadmap, along with the establishment of “competitiveness enhancement funds” for the components of the livestock value chain.
Since corn is used as feed for livestock, poultry and fish, Chua said this can help address the other drivers of food inflation.
“We are taking a more proactive approach in promoting the development and competitiveness of corn. We are doing this to help ease prices of sources of protein such as meat and fish, which are still among the top drivers of our country’s overall inflation,” Chua said.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said inflation would continue to cool in the coming months, although he warned that this may be offset by higher global oil prices and other imported commodities.
“Non-monetary measures such as the increased importation of pork, fish and rice at lower tariffs, as well as the recent increase in the imports of cheaper vegetables and other food items would have also helped increase local food supplies and aid in lowering prices and overall inflation,” Ricafort said.
ING Bank senior economist Nicholas Mapa said the January reading has given the Bangko Sentral ng Pilipinas (BSP) a little more space to retain its accommodative policy stance.
While the base-year shift will have a material impact on 2022 inflation, Mapa said price pressures could still intensify.
Supply side bottlenecks remain as domestic hog production continues to be hampered by the spread of African swine fever while crude oil prices edge higher.
“Improving economic conditions have fueled the modest rebound of demand-side pressures, which could nudge inflation higher as well,” Mapa said.
“Persistent inflation pressure coupled with the likely reversal in financial flows linked to Fed hikes could eventually convince a rather dovish BSP to finally consider a policy adjustment by the end of the second quarter,” he said.
Meanwhile, inflation in the National Capital Region also eased to 1.3 percent while that of the areas outside NCR slowed to three percent.
On the other hand, consumer prices for the country’s poorest households decelerated as CPI for the bottom 30 percent income group eased to 3.2 percent.
Slower growth was seen in the indexes of housing, water, electricity, gas, and other fuels, alcoholic beverages and tobacco, clothing and footwear, health, and transport, among others.
Prices of consumer goods for the poorest households outside the NCR remained at 3.4 percent while inflation in NCR recorded zero percent annual growth.