May inflation likely at 1.4%, says DOF economist

INFLATION likely rose at a faster 1.4 percent in May mainly on higher food prices, the Department of Finance’s (DOF) chief economist said.

In an economic bulletin issued last week, Finance Undersecretary Gil S. Beltran said the rate of increase in the prices of basic goods might have inched up to 1.4 percent last month, from 1.1 percent in April but below the 1.6 percent posted a year ago.

The government will announce the May inflation figure on Tuesday, June 7.

Beltran said the DOF’s forecast, which was below the government’s target range of 2-4 percent for the year, came on the back of “comparatively lower fuel and electricity prices that the country still enjoys,” citing for instance that “Meralco rates for May are, on average, 15-percent lower that of the same month last year.”

The month-on-month uptick was attributed by Beltran to “increase in food prices, particularly vegetables.”

In a note to clients last week, Metrobank Research analyst Mabellene Reynaldo projected last month’s inflation to have settled at 1.4 percent, which she noted would be “the highest so far this year, on the back of rising food and oil prices along with a lower base.”

“Oil prices found some support in the middle of the month given reports of lower supply… On the other hand, food prices continue to trend higher due to limited supply and strong domestic demand,” Reynaldo explained.

The same reasons were cited by Standard Chartered Bank economist Jeff Ng for his similar forecast of 1.4 percent.

Banco De Oro Unibank Inc. chief market strategist Jonathan L. Ravelas also said consumer prices likely grew by about 1.4 percent in May, while DBS Bank Ltd. economist Gundy Cahyadi projected a lower 1.3 percent.

ING Bank Manila senior economist Joey Cuyegkeng also expected May inflation at 1.3 percent on the back of “some upside pressures due to El Niño and oil product price increases.”

Bank of the Philippine Islands associate economist Nicholas Antonio T. Mapa and Land Bank of the Philippines market economist Guian Angelo S. Dumalagan made higher forecasts of 1.5 percent and 1.7 percent, respectively.

“Power rates and transportation continue to show deflationary price trends, dragging the overall year-on-year print as oil prices remain relatively depressed. Offsetting this disinflationary trend were food prices, which were higher 2.2 percent year-on-year as vegetables and fruits drove the overall print higher on El Niño while rice prices only saw marginal inflationary trends given ample importation of the staple grains,” Mapa explained.

“Increased election spending in May might have also pushed inflation higher last month,” Dumalagan said.

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. earlier said increases in food and fuel prices last May likely pushed inflation faster than a month ago.