Higher food, fuel costs raise inflation to 3.2%

MANILA, Philippines — Prices of basic goods and services rose at a slightly faster clip in May due to higher food prices as well as an increase in rent and utilities and fuel costs, the government said on Wednesday.

At a press briefing, the Philippine Statistics Authority said the headline inflation rate rose by 3.2 percent last month compared to 3 percent in April, but lower than the 4.6 percent recorded in May 2018.

The latest figure brings the Philippines’ year-to-date headline inflation rate to 3.6 percent and marks the first uptick after six straight months of decline following last year’s broad price surge.

“The uptrend was primarily brought about by higher annual rates posted in the heavily weighted food and nonalcoholic beverages index at 3.4 percent; and housing, water, electricity, gas and other fuels index at 3.3 percent,” said Claire Dennis Mapa, national statistician and civil registrar general.

Slower annual increments were observed in the indices of alcoholic beverages and tobacco at 9.5 percent, transport at 3.5 percent and restaurant and miscellaneous goods and services at 3.3 percent, he said.

Temporary phenomenon

The rest of the commodity groups retained their previous month’s annual rates.

The Bangko Sentral ng Pilipinas (BSP), which eased monetary policy last month on the account of the previous inflation downtrend, dismissed the latest data as a temporary phenomenon.

“That cannot be seen as an acceleration,” BSP Governor Benjamin Diokno said in a text message to reporters. “One data point does not constitute a trend … The inflation rate in May is within BSP’s forecasts of 2.8-3.6 percent for the month.”

Diokno said regulators expected inflation to be in the neighborhood of 2 percent in the third quarter of the year.

“With world oil prices easing, we expect the annual inflation rate to be in the vicinity of 3 percent in 2019 and 2020,” he said.

Michael Ricafort, chief economist for Rizal Commercial Banking Corp., said the slight uptick was also caused by the mild El Niño dry spell.

Decline in rice prices

“Any further increase in rice imports with the removal of volume limits on imported rice under the Rice Tariffication Law may lead to higher local supply of rice, on top of the summer rice harvests and, in turn, may lead to further decline in rice prices that may contribute to further easing in inflation as rice accounts for about 10 percent of the inflation index,” Ricafort said.

Excluding selected food and energy items, core inflation picked up by 3.5 percent in May 2019. Core inflation in April registered at 3.4 percent. In May 2018, it was 3.6 percent.

For the country’s food index, inflation accelerated by 3.2 percent in May, higher than the previous month’s 2.9 percent. In May 2018, it was at 5.5 percent.