Economists see inflation inching up in August

INFLATION likely inched up to 2 percent in August on the back of increases in the prices of “sin” products and in transport costs, the Department of Finance (DOF) said.

In an economic bulletin last week, Finance Undersecretary Gil S. Beltran said the rate of increase in prices of basic goods last month was seen faster than the 1.9-percent headline inflation posted in July and the 0.6 percent recorded in August last year. The August inflation report will be released on Tuesday.

“In August, prices of alcoholic beverages and tobacco may rise from July’s 5.8 percent to 6.4 percent; transport could reverse from -0.1 percent to a faster 0.3 percent; and housing, utilities and fuels could increase from  -0.2 percent to 0.1 percent,” he said in a report to Finance Secretary Carlos G. Dominguez III.

“Likewise, prices of clothing and footwear may increase from 2.5 percent in July to 2.7 percent; health could jump from 2.4 percent to 2.6 percent; furnishings, households equipment may rise from 2 percent to 2.1 percent while restaurants and miscellaneous services could inch up from 2.3 percent to 2.4 percent,” Beltran added.

Economists polled by the Inquirer see inflation in August either flat or just slightly up from a month ago.

University of Asia and the Pacific economist Victor A. Abola has the same forecast as Beltran “due to the big increase in fuel prices.”

“However, food prices have been relatively stable, and electricity rates slightly softer,” Abola said.

Standard Chartered Bank economist for Asia Chidu Narayanan said headline inflation in August edged up to 2 percent as food inflation rose 2.7 percent, offsetting steady utility costs, low transport inflation and lower housing prices.

A similar 2 percent year-on-year inflation was expected by ING Bank Manila senior economist Joey Cuyegkeng, “with the expectation that inflation would trend higher in the next 12-18 months.”

Land Bank of the Philippines economist Guian Angelo S. Dumalagan sees a 2.1 percent inflation, citing that “the drag from lower oil prices softened last month.”

“Oil prices fell by about 23 percent year-on-year in August, lower than July’s 26-percent plunge. On a monthly basis, oil prices rose by about 6 percent. The peso’s annual depreciation against the dollar and the country’s robust domestic demand continued to push domestic prices higher, while the easing impact of El Niño on farm production kept the increase in food prices modest,” he said.

Metrobank Research analyst Pauline May Ann E. Revillas expected inflation last month at 2.2 percent “on the back of high food and oil prices.”

Three economists expected steady inflation in August compared to a month ago.

“We expect inflation in the Philippines to remain below target in August at 1.9 percent year-on-year. Electricity prices declined over the month. The Wholesale Electricity Spot Market (WESM) decreased as the supply situation improved. This should be partially offset by the seesaw  in retail gasoline and diesel prices,” ANZ Research economist for South and Southeast Asia Eugenia F. Victorino said.

Joseph Incalcaterra. Asia-Pacific economist at HSBC, said August inflation was likely steady from July at 1.9 percent year-on-year “as sequential price pressures stay subdued.”

“Retail petrol prices subsided during the month in line with global oil prices, and although food prices likely accelerated somewhat during the month, they are still relatively contained, Incalcaterra explained.

“Our estimate is 1.9 percent due to the monsoon effects on food prices,” Ateneo de Manila University economics professor Alvin P. Ang said.

Inflation averaged 1.4 percent at the end of the first seven months, below the government’s 2-4 percent target range for 2016.