Inflation eased to 2.8% in November

Gov’t agency cites decline in fuel, food prices

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Customers buy vegetables in a Manila market in this file photo. Inflation in November 2012 dipped to its lowest in five straight months due to an ample supply of agricultural products and cheaper local oil prices. AFP PHOTO/JAY DIRECTO

Inflation in November dipped to its lowest in five straight months due to an ample supply of agricultural products and cheaper local oil prices.

The National Statistics Office (NSO) reported Wednesday that the year-on-year inflation last month, as measured by the consumer price index, slowed to 2.8 percent from 3.1 percent in October.

The latest inflation figure did not surprise economists as earlier projections had been made on the sustained downtrend in inflation before the year ends due to stable food prices and a stronger peso. The figure was also at the lower end of the 2.7-3.6 percent target range of the Bangko Sentral ng Pilipinas for the month.

The lowest since July, the November inflation rate was a marked improvement from the year-ago rate of 4.7 percent. The NSO recorded the lowest year-on-year inflation last March at 2.6 percent.

“The country’s annual [increase] in the food index was pegged at 2.1 percent in November. This was slower than the 2.5-percent growth in October,” the NSO said.

Core inflation, which represents long-term inflation trend, stood at 3.4 percent in November, slower compared to the 3.6 percent in October. The lower core inflation implies an easing of demand pressures on consumer prices.

“With the continued benign price increases for the period, we are expecting that inflation should be manageable for the rest of the year,” National Economic Development Authority officer-in-charge Rolando Tungpalan said in a statement.

According to the NSO, the decline in the year-on-year inflation was helped by the slower price gains in heavily weighted food, non-alcoholic beverages, electricity and fuel.

Citing industry data, Tungpalan noted that Manila Electric Co.’s generation charge last November was lower by 2.7 percent (P0.16/kWh) against the same period in 2011 due to lower generation costs from suppliers.

He also said the prices of kerosene, which slowed down, fell by 2.5 percent in November from an increase of 3.5 percent in October. Diesel prices likewise eased by 4.6 percent from 3.1 percent.

“These were due to the trimmed trading price of Dubai crude in the international market, which contracted by 1.6 percent from a 4.8 percent growth in October 2012,” Tungpalan said.

In Metro Manila, the year-on-year inflation also eased to 2.6 percent in November from 2.9 percent in October as the NSO recorded lower year-on-year price increases in food and non-alcoholic beverages (1.6 percent); housing, water, electricity, gas and other fuels (2.5 percent) and restaurant and miscellaneous goods (3.6 percent).

The annual inflation in areas outside Metro Manila likewise moved at a slower pace, settling at 2.9 percent in November from 3.3 percent in October.

“This is consistent with my earlier prediction that full-year inflation would be in the neighborhood of 3.2 percent, approaching the lower end of the official inflation forecast,” said economist Benjamin Diokno of the UP School of Economics.

The mild rise in prices is caused by a strong peso and “not good governance as Malacañang would like to claim,” added the former budget secretary.

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  • japokjackpot

    2.8%? do you agree?… inclusive growth? why the prices of goods and services not going down?

    • Diablo_III

      it will go down if nag deflate. Nag inflate nga… ano ba….

      • japokjackpot

        according to NEDA from 3.1 (October) to 2.8 (November)?

    • Eric

       same question. thanks!

    • Joseph

      why don’t you check what the definition of inflation is.

      If prices go down, that is known as “deflation”. Incase you don’t know, deflation is more dangerous than inflation.

    • oh_noh

      strong economy – in paper! *hooray*
      The latest inflation figure did not surprise economists as earlier projections had been made on the sustained downtrend in inflation before the year ends due to stable food prices and a stronger peso

      stronger peso, why stable food prices? dapat lower food prices!!!

    • LV

      Inflation is a consequence of increased money supply and demand side exceeding the supply. The only way prices of goods and services to go down is that the government implement policies which favors deflation. For instance, it can mandate suppliers, service providers, mechants, retailers, etc to sell their product/services at a lower cost fixed by the government. This will initially increase consumption. However, in the long run this can initiate a negative chain reaction:
      >> low price leads to less profit for businesses
      >> less profit for businesses leads to less income for owners and also workers
      >> less income leads to lower consumption
      >> lower consumption leads to even lower profit for business and lower investments
      >> lower investment leads to lower growth in employment (which has to be balanced with population growth)… and so on.

      Another way is to tighten monetary policy that increases Central Bank’s interest rate. At higher interest rate, people and businesses will be more encouraged to deposit money than to take out loans due to higher borrowing costs. You may think this is good but in fact it has a net negative effect: lower money supply leads to lower expenditures and lower investments, ultimately leading to lower economic output and decrease employment opportunities. 

      And yet another way is to loosen foreign exchange controls by freely floating peso, without ever intervening in the exchanges i.e., by allowing peso to appreciate more against the dollar. Right now, BSP is artificially trying to maintain the upward spiral of peso by flooding the economy with printed money. If BSP allows peso to increase to P30-35 per dollar range (which some economists are saying the real current market value of peso). Since we are a net importer, this will lead to cheaper prices of almost everything: electronic goods, gasoline, manufactured goods, food, clothes, building materials, etc. However, the downside is less money for OFW families and exporters. Less money for them leads to less demand – and now you can achieve a scenario where supply exceeds demand and hence cheaper prices.

      Deflationary policies have more downsides. The key, is to maintain a level of inflation rate that is stable and lower than the economic growth.

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