April inflation likely eased further as lockdown tamed spending

Headline inflation likely further sof­tened in April, although movement restrictions due to the lockdown imposed over Luzon and other parts of the country to contain the spread of the new coronavirus pushed food prices higher.

Of the 14 economists polled by the Inquirer last week, 12 projected the rate of increase in prices of basic commodities falling below the three-month low of 2.5 percent recorded in March, including four forecasts below 2 percent.

Capital Economics’ Alex Holmes had the lowest forecast of 1.8 percent year-on-year, while Ateneo de Manila University’s Alvin Ang, Nomura’s Euben Paracuelles and Oxford Economics’ Thatchinamoorthy Krshnan shared a projection of 1.9 percent.

Amid the enhanced community quarantine, which began in mid-March as the country coun­ted the number of COVID-19 cases, Ang noted “people shifted to essentials only—focusing on food and health, and significantly reducing travel and leisure.” The world’s confirmed cases of COVID-19, the disease caused by the new coronavirus, has reached more than three million to date forcing several countries to limit people’s movements.

“But food prices were rising due to effects of supply bottlenecks during the [quarantine],” Ang noted.

For his part, Krshnan said “record-low global oil prices feeding into local pump prices and slowing economic activity as a result of the lockdown are expected to reduce inflationary pressures.” World oil prices plunged to nega­tive territory last month.

ING Bank Philippines’ Nicholas Antonio Mapa, Philippine National Bank’s Francisco Trinidad Jr. and Union Bank of the Philippines’ Ruben Carlo Asuncion computed a 2-percent inflation in April.

Mapa said last month’s number was “affected by the National Capital Region’s inflation,” as the capital hosted the bulk of the country’s economic activities prequarantine.

“Lackluster demand and low oil prices accelerated disinflation in April,” Trinidad said.

He said consumers let go of other expenses amid wage cuts and dimmer job prospects.

Asuncion said rising rice and vegetable prices may offset the downward pressures from the lack of consumption demand.

Maybank Investment Bank’s Suhaimi Bin Ilias, Rizal Commercial Banking Corp.’s Michael Ricafort and Sun Life Financial’s Patrick Ella, meanwhile, projec­ted 2.1 percent.

Ricafort noted the recent stronger peso exchange rate against the US dollar would help reduce the prices of imports and also reduce overall inflation. Security Bank’s Robert Dan Roces expects last month’s inflation rate at 2.2 percent, while Citi’s Johanna Chua pitched 2.4 percent year-on-year.

Bank of the Philippine Islands’ Emilio Neri Jr. projected 2.6 percent, slightly higher than March. Moody’s Analytics’ Brady Seitz said the first-quarter inflation rate could have averaged 2.8 percent.”—BEN O. DE VERA INQ