Further increase in prices of basic goods seen

Prices of basic commodities are expected to further increase in the coming months due to rising food costs, according to DBS Group.

The Singapore-based financial services group said in a research note that prices would rise month on month at an average of 0.4 percent from October this year to March 2012.

This is double the 0.2 percent monthly increase observed in April to September this year, DBS said.

“Food price pressures [have started] to materialize in October following a strong typhoon in late September,” the group said.

Last week, DBS correctly forecast that October inflation would settle at 5.2 percent year on year. This was faster than the 4.8 percent recorded in September.

The National Statistics Office reported Friday that faster inflation was due to bigger price increases in food and non-alcoholic beverages; alcoholic beverages and tobacco; housing, water and electricity; and gas and other fuels.

“An estimated 760,000 tons or 7.7 percent of projected second-semester harvest of unhusked rice were damaged,” DBS noted.

“Despite the crop destruction, authorities have stated that there is no need to import more rice for the rest of the year,” it added.

But DBS said the same scenario is not likely for 2012 when the government believes some 500,000 tons of rice must be imported.

The group said current flooding in Thailand is likely to push up international prices of rice.

“We expect a higher-than-trend pickup in inflation in the coming months, averaging 0.4 percent month on month from October to March, compared with 0.2 percent in the six months ending September,” DBS said.

Even then, DBS said Philippine inflation is expected to ease to 4.4 percent in December, bringing the average for 2011 to 4.9 percent.

DBS said inflation will ease to an average of 4.7 percent in 2012, despite the faster monthly inflation that will be seen at the start of next year.

“The acceleration in sequential inflation will not be of immediate concern to the central bank especially in light of persistent global headwinds,” it added. “We expect BSP (Bangko Sentral ng Pilipinas) to maintain the overnight borrowing rate at 4.5 percent through to the third quarter of 2012.”