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PH’s 2012 inflation slows to 3.2%

No surprise there, say economists, citing strong peso as a factor

By: Riza T. Olchondra, January 4th, 2013 09:44 PM


The average inflation in 2012 slowed to 3.2 percent, from the 4.6 percent recorded in the previous year, hitting the low end of the Bangko Sentral ng Pilipinas’ target range of 3 to 5 percent, the National Statistics Office (NSO) said Friday.

Also, the rate of increase in consumer prices accelerated to 2.9 percent in December, from the previous month’s 2.8 percent, on higher food, beverage and tobacco prices, the NSO reported.

Despite reports that some consumers have been stocking up on tobacco ahead of the anticipated tax hikes starting this year, the low-weighted tobacco and alcoholic beverages index hardly seemed to push consumer prices, official said.

The 3.2 percent inflation was also the lowest since 2007, when the rate slowed to 2.9 percent due to the global financial crisis.

Core inflation, which excludes food items and fuel because of their volatile nature, eased to 3.3 percent in December from 3.4 percent in November.

The annual average core inflation also slowed to 3.7 percent in 2012 from the 4.3 percent recorded the previous.

Economists as well as retailers said the figures were not surprising given enough commodity supplies in the Philippines and a strong peso.

“This suggests that inflation is not the problem, rather, it’s still a sustained strong growth. The strong peso is the biggest contributor to the mild inflation,” Benjamin E. Diokno of the UP School of Economics said in text message.

This year, Diokno said, price risks could come from oil prices and “more damaging than usual” natural calamities, which might exert greater pressure on food prices.

Food takes up the bulk of household budgets. Due to the higher taxes imposed on the prices of cigarettes and alcoholic beverages, these items may contribute to inflation “to a limited extent,” the economist added.

Also, wages are not expected to drive up inflation because of large surplus labor, he said.

“Inflation will continue to be low as long as the peso remains strong and oil prices won’t rise wildly,” Cid L. Terosa of the University of Asia and the Pacific said in a text message.

Retailers said prices had been “tame” for the last few years because of tight competition and consumer sensitivity, which kept prices stable.

“Consumer prices did not move much. This will be the case for the first semester, at least if there will be no major increase in input costs. Retail prices have remained stable because of the stiffer competition among retailers both in the formal and informal sectors and a consumer market that has exhibited a preference for shopping in lower price retail outlets,” Philippine Association of Supermarkets Inc. president Carlos V. Cabochan said in a text message.

Philippine Amalgamated Supermarkets Association Inc. president Steven T. Cua also said stable inflation in 2012 would be good for consumers since it preserves their ability to buy goods and services.

Businesses may also benefit, he added, as benign inflation may encourage the financial sector to keep interest rates low to keep the cost of money low while it sustains the expansion of various industries.

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