SLOWING DOWN. Citing a slowing rise in food prices, the central bank said annual inflation may be peaking earlier than its previous estimate of September-October, and may come at the low end of its forecast range of 9-11% this year and next year\'s estimated range of 6-8%. Inflation accelerated further to 12.5 percent in August, up from a revised 12.3 percent in July. Graph by BERNADETTE GARCIA / INQUIRER.net
Inflation hit 12.5% in August By Michelle Remo, Doris Dumlao Philippine Daily Inquirer First Posted 03:08:00 09/06/2008
MANILA, Philippines—The prices of goods and services consumed by an average Filipino household jumped 12.5 percent in August from a year earlier, sustaining an inflation rate not seen in 17 years.
This was keenly felt by Ana Astadan, a working mother, who complained that the money she spent on groceries last year would not be enough to buy the same amount of goods this year.
“Our family really felt the increase in prices of food and transportation,” said Astadan, 26, who works as a sales trainer. “We have to think of [other] means to make both ends meet.”
Instead of riding taxicabs to and from work, Astadan said, she now rides jeepneys to save on transport expenses.
Call center agent Ralph Ferriols, 23, also felt the pinch, which had led him to a radical change in lifestyle.
“Before, I did not care where I buy food and groceries,” said Ferriols, who said he used to buy goods at high-end stores. “But now, I have to make sure I buy from places where they sell the cheapest goods.”
He said he used to drive to work every day, but now takes public transport. “Gas has become so expensive,” he said.
The rise in the prices of goods and services in August brought the inflation average for the first eight months of the year to 8.8 percent, the National Statistics Office reported Friday.
The central bank, Bangko Sentral ng Pilipinas (BSP), said the worst might now be over for the Filipino consumer, as global oil and food prices have started to ease.
The BSP expects inflation as measure by the increase in the consumer price index to peak earlier than expected and average closer to nine percent for the year.
“What we have observed is that the pace of inflation has moderated,” BSP Governor Amando Tetangco Jr. said Friday. “The rate of change has slowed down. [The] 12.5-percent inflation for August is only slightly higher than the 12.3 percent in July.”
Tetangco explained that the recent drop in oil prices had affected local prices of different commodities.
International crude prices have fallen below the crucial $110/barrel mark to hit $107 a barrel as of Thursday.
“Also, we have seen ... a moderation in food prices, so both these developments have positively affected the movement of inflation,” Tetangco added. “It’s possible that the country may have already seen the worst of consumer price spikes.”
Economist Benjamin Diokno, former secretary of the budget and now professor at the University of the Philippines, does not see it that way.
“We cannot say that inflation already peaked in August,” Diokno said in a phone interview. “Meralco [power retailer Manila Electric Co.] has just announced that it will increase its rates, and this can have an impact on inflation.”
Diokno said inflation could accelerate further in the coming months, and start to slow down to single-digit levels only in the second quarter of 2009.
Fuel prices in the world market have already eased in August after posting historic highs the previous months. But inflation still shot up in August, Diokno explained, because there was still a lag in the impact of world oil prices on domestic prices.
Oil companies still had under-recoveries in August and so did not roll back fuel prices immediately after world prices dropped.
Governor Tetangco said that, based on the latest numbers, inflation would peak sometime in September and October.
He added that, according to the BSP’s latest assessment, full-year inflation average could be closer to the lower end of the central bank’s revised forecast range of 9 to 11 percent.
Inflation in August was below the 12.6-percent ceiling the BSP had earlier projected for the month.
Still, all commodity groups, except food, beverage and tobacco as a group, marked a faster year-on-year increase in prices in August than in July, when inflation stood at 12.3 percent, the National Statistics Office reported.
Core inflation, which excludes the volatile prices of selected food and energy items, also accelerated to 7.0 percent in August from 6.3 percent in July.
In its report, the National Statistics Office listed the rates of price increases for the different commodity groups in August: The rate of increase for clothing went up to 4.6 percent in August from 4.5 percent in July, housing and repairs to 5.0 percent from 4.6 percent, fuel, light and water to 7.2 from 5.5 percent, services to 13.5 percent from 12.5 percent, and miscellaneous items to 3.3 percent from 3.0 percent.
The services sector, which was weighed down by tight consumer spending in the second quarter, is expected to rebound in the second half and meet its full-year growth target of 6.3 percent, the National Economic and Development Authority (NEDA) said Friday.
The services sector grew 4.3 percent in the April-June quarter, as high inflation forced some households to trim spending on nonessentials and focus on food, fuel and other basic items.
In the first half of the year, the sector grew 5.4 percent.
Growth of the services group was the slowest among key sectors of the economy in the second quarter. Industry grew by 4.8 percent, while agriculture, fisheries and forestry expanded by 4.9 percent, the NEDA reported.
The services sector is composed of trade, transportation, communication, storage, finance and real estate, among others. Business process outsourcing is also part of the services sector and falls under the communication sub-sector.
Economists said the sharp increase in the prices of goods and services this year was largely attributed to the oil crisis, which had hit historic highs earlier this year.
A similar oil crisis drove up inflation 17 years ago, when the rate peaked at more than 13 percent. With editing by INQUIRER.net
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