Inflation seen to stay within target range despite rise in cement prices

Cement pours down as workers rehabilitate a road in the Philippine financial district of Makati in this file photo. Prices of cement may be increasing, but the Bangko Sentral ng Pilipinas is confident it will not affect significantly the overall inflation rate this year. AFP PHOT/ JOEl NITO

MANILA, Philippines—Prices of cement may be increasing, but the Bangko Sentral ng Pilipinas is confident it will not affect significantly the overall inflation rate this year.

It said the increase in consumer prices this year would remain benign.

The BSP said the slight uptick in the prices of cement early this year could even be a positive economic indicator, as this meant a booming construction sector.

Growth in construction activities is believed to indicate a rising demand not only for residential properties, but also for office space. It also indicates rising public infrastructure projects. Growing investments, in turn, are seen to help boost supply of goods and services to levels deemed enough to meet growing demand and keep inflation rate modest, the BSP said.

Given this backdrop, a ranking BSP official said the increase in cement prices should not be taken as an indication of a significant acceleration of inflation in the months ahead.

For February, the BSP’s inflation forecast was set at a range of 2.8 to 3.7 percent. The actual inflation for the month is seen closer to the lower end of this range.

“Prices of commodities are generally stable with slight price increases for cement. The increase in cement prices should not be viewed negatively, as this signals renewed business activities in the construction sector,” said BSP Deputy Governor Diwa Guinigundo over the weekend.

Current cement prices range from P200 and P230 per bag, which are said to be a bit higher than levels seen last year. The increase in cement prices is consistent with projections by the cement manufacturing industry of a significant rise in sales this year on the back of growing demand for the product.

The government’s official inflation targets for this year and next year were set at a range of 3 to 5 percent.

In the meantime, the BSP said the increase in the prices of petroleum so far this year remained insignificant.

Global oil prices stand at $110 a barrel, which Guinigundo said was still within the central bank’s assumptions when it announced last week its inflation forecast for February.—Michelle V. Remo