Inflation ended downtrend, inched up ‍‍‍in November

Inflation inched up to 1.3 percent year-on-year in November as base effects from last year’s elevated rates wore out and prices of cigarettes and alcoholic drinks rose nationwide alongside increasing prices of alternatives to pork amid the African swine fever (ASF) scare.The rate of increase in prices of basic commodities last month was the highest in three months, bringing the end-November headline average to 2.5 percent, within the government’s 2-4 percent target range.

November inflation picked up from the 42-month low of 0.8 percent in October but still lower than the 6 percent posted a year ago.

As this developed, the Bangko Sentral ng Pilipinas (BSP)—whose interest rate policy is one of the key determinants of the cost of goods and services—said it expected consumer prices to move higher in the final month of the year, but ease in the new year.

“The latest inflation outturn remains consistent with the BSP’s prevailing assessment that inflation has bottomed out in October and is expected to gradually approach the midpoint of the target range in 2020 and 2021,” the central bank said.

“The risks to the inflation outlook are on the upside for 2020, but are tilted to the downside in 2021,” it added.
In November, prices of alcoholic beverages and tobacco jumped 17.6 percent, which National Statistician Claire Dennis Mapa attributed to the impact of higher excise slapped on these “sin” products under the Tax Reform for Acceleration and Inclusion Act.

Sin taxes would further rise in January as the Duterte administration’s tax reform package “2 plus” was expected to be green-lit by Congress before the end of the year.

Inflation in Metro Manila last month was 1.5 percent, slower than the 5.6 percent a year ago but faster than the 1.3 percent a month ago.

Outside Metro Manila, Central Luzon posted the highest November inflation rate of 2.2 percent.

Mapa said that due to ASF in Metro Manila and Central Luzon, chicken prices in these two regions climbed by a fifth last month while beef prices rose by about 5 percent.

Prices of fish such as galunggong, tulingan and tilapia also rose in November as consumers turned to food items other than pork, Mapa said.

On the other hand, the onslaught of ASF pulled down pork prices by 4 to 6 percent, Mapa added.

As for rice, retail prices fell 8.3 percent in November.

“We expect the 2019 full-year inflation to settle within the government’s target. However, there remains upside risks to inflation such as the impact of Typhoon “Tisoy” and ASF. It is also crucial to ensure sufficient supply of key food items in managing the country’s overall inflation, especially with the anticipated surge in demand this holiday season,” National Economic and Development Authority (Neda) undersecretary and officer in charge Adoracion M. Navarro said in a statement.

Going forward, the central bank said it would “carefully consider all the latest developments here and abroad” at its upcoming monetary policy meeting on Dec. 12, 2019, “to ensure that the monetary policy stance would remain consistent with the BSP’s price stability objective.”

So far this year, the BSP has cut its key interest rate by 75 basis points as inflation pressures eased. Governor Benjamin Diokno had earlier ruled out further monetary easing for the rest of the year, but later opened the door to the possibility of another adjustment at next week’s final Monetary Board meeting for 2019.