Sadder Noche Buena

Last Friday, the Philippine Statistics Authority (PSA) reported that the inflation rate in October accelerated to a 14-year high of 7.7 percent from 6.9 percent in September. Oh well, seven is the lucky number of Junior’s father. Double seven pa… double lucky?

It surprised the economists of leading financial institutions. The highest forecasts were made by Emilio S. Neri Jr of BPI and Jonathan Ravelas, formerly of BDO, at 7.4 percent.

The higher inflation rate was driven by faster increases in the prices of food and non-alcoholic beverages. “This is the highest recorded inflation since December 2008,” the PSA said.

The Bangko Sentral ng Pilipinas quickly released a statement saying they were not surprised. It is within the BSP’s forecast range of 7.1 to 7.9 percent.

BSP said it is consistent with the central bank’s assessment of inflation remaining above target over the near term, as price pressures broaden and signs of further adverse second-round effects emerge.

Inflation is projected to remain elevated for the rest of 2022, the BSP warned. The risks to the inflation outlook appear to be tilted to the upside for 2022 and 2023.

From the BSP: “The potential impact of higher global non-oil prices, additional transport fare hikes, increased food prices owing to weather disturbances, and a sharp rise in sugar prices are the major upside risks to the inflation outlook. Meanwhile, the impact of a weaker-than-expected global economic recovery is the primary downside risk to the outlook.”

Emphasizing the limits of what the BSP could do, it strongly urged the timely implementation of non-monetary government interventions to mitigate the impact of persistent supply-side pressures on inflation. In other words, the DA and DTI must do their jobs.

Inflationary pressures will increase with the Christmas season, winter causing oil and gas demand to perk up, agri damage from Karding and Paeng, and the lean season for fish catch. Sugar producers are also asking for an increase in SRP.

Food contributed 81 percent to the increase in the October inflation rate. Sugar’s inflation rate was 34 percent, the clearest market signal of supply and demand imbalance… contrary to claims made by Sen. Migz Zubiri and some sectors of the sugar industry that there is enough supply.

The 81 percent contribution of the food group to the inflation rate MORE THAN NEGATED the zero to very low contribution of rice to inflation (0.8 percent from negative 0.2 percent in September).

The stable rice price appears to be further proof of the positive impact of the Rice Tariffication Law. It confirmed the observation of Dr. Bruce Tolentino, a member of the Monetary Board, that the RTL ended six decades of rice as a key inflation factor.

But not for long. Agriculture Senior Undersecretary Domingo Panganiban said they see a spike of 15 to 20 percent in prices of food items because the rice-producing region of Central Luzon suffered the most from recent typhoons.

According to a DA tally, Typhoon Karding wiped out P2.02 billion worth of agricultural produce, with the rice sector accounting for nearly 82 percent or P1.66 billion of the recorded damage in the farm sector.

Also damaged were high-value crops, which suffered P271.6 million in losses; corn, P44.6 million; fisheries, P43 million; and livestock and poultry, P7.9 million.

So, dealing with rising food prices will be Junior’s principal headache as we approach Christmas. And Junior must be worried because a gag order was reportedly imposed on DA personnel.

Even the reporting of DA’s daily price monitoring of key food items in the 12 large wet markets in the NCR appears to have stopped. A knowledgeable source told me he has not received data for the past days now after the gag order.

That’s understandable. But on the other hand, food prices can’t remain a secret. People go to the market daily.

Junior has to stop pretending he can play at being agriculture secretary because he doesn’t know much about agriculture and he has his hands full being president.

Sources say DA staff are complaining there is no plan and program to guide them on what to do. The priority of the current caretaker is to replace people with their own. There is demoralization among the ranks.

The project concept for Masagana 150 and 200 has been done. But until now there is no work plan and guidelines to implement them. The experts comprising the hybrid rice team were fired.

There is no usec or asec for livestock to head the pre-inspection committee in charge of identifying where missions will go to accredit trading partners in meat and meat products. Likewise no one has been designated to co-chair the accreditation review body that (dis)/approves mission findings. No transition or mode of operations on how to prevent further spread of ASF and avian flu.

In the meantime, prices of Noche Buena items in sari-sari stores have been increasing. Packworks, a start-up helping sari-sari stores, reports that data from Sari IQ, the firm’s data analytics tool, saw increases in the prices of Noche Buena items from January to September.

Sari IQ measures behavior and spending habits of consumers who shop at sari-sari stores. Their data are granular and reliable.

The Department of Trade and Industry (DTI) said local manufacturers and makers of Noche Buena items want to increase their prices ahead of the holiday season. But DTI could only issue a “price guide” because most of the Noche Buena items were not considered prime or basic commodities.

Rising food prices is why the Foundation for Economic Freedom (FEF) wrote to the Tariff Commission requesting for an extension of tariff reductions, as contained in Executive Order 171, for pork, corn, rice and coal.

“We all recognize that higher inflation, particularly food, hurts the poor most because their limited income source cannot keep up with the pace of price increases.”

Junior has to be more decisive at DA to address this looming food crisis. He has Arsi Balisacan, a respected agricultural economist by his side. But more than ideas from Arsi, Junior needs action-oriented subordinates who will make things happen.

For now, we should expect a sadder Noche Buena because of food inflation. This Christmas crisis will happen because Junior can’t get his act together fast.

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco