Inflation eased to 6-month low of 2.1% in May

As transport costs fell while most Filipinos stayed at home during the COVID-19 quarantine, inflation eased to a six-month low of 2.1 percent year-on-year in May, the government reported on Friday.

Philippine Statistics Autho­rity (PSA) data showed that last month’s headline inflation was the lowest since November 2019’s 1.3 percent, bringing the first five-month average to 2.5 percent, well-within the government’s target range of 2-4 percent for 2020.

During a virtual press conference, national statistician Claire Dennis Mapa attributed the softer inflation rate mainly to a 5.6-percent drop in the transport index.

“Specifically, annual decline was observed in petroleum and fuels for personal transport equipment, at negative 28.8 percent in May,” Mapa noted.

In the case of food and nonalcoholic drinks, which accounted for 38 percent of the consumer price index (CPI) basket, several items posted deflation or lower prices year-on-year, such as corn, sugar and rice.

The 2.7-percent decline in rice prices posted in May marked the 13th straight month of deflation for the Filipino staple food, although the smallest decrease to date, due to base effect.

At a separate press confe­r­ence, Acting Socioeconomic Planning Secretary Karl Kendrick Chua said the May inflation print showed that despite the COVID-19 lockdown, “prices have remained low and stable.”

“A number of reasons explain this. These include the continued implementation of the rice tariffication law, which has brought down the price of rice by around P10 a kilo from the 2018 peak. Moreover, efforts of the government to improve the supply chain of essential goods, notably food, during the [enhanced community quarantine] also helped significantly. The price freeze order to make sure that no unscrupulous trader would take advantage of the crisis also contributed to low inflation,” said Chua, who heads the state planning agency National Economic and Development Authority.

“In all these, it was not just the government that made this happen. Producers worked hard to supply goods continuously despite initial challenges, businesses supported the price freeze order, and consumers cooperated and purchased only what they needed. This is the kind of whole-nation approach that will help the country recover faster,” Chua added.

In May, inflation for meat, fish, fruits, vegetables as well as milk, cheese and eggs slowed down, but price increases in oil and fats and other cereals, flour, bread and pasta were faster.

In the case of poor families, year-on-year inflation for the bottom 30-percent income households stayed at 2.9 percent last month, similar to the rate in April—the highest since the 3.1 percent in June last year.

The price increases being felt by poor households were usually bigger than the nationwide headline rate as 58 percent of their CPI basket is made up of food, Mapa explained.

“Inflation for the bottom 30-percent households is very sensitive to food prices,” Mapa said.

While food inflation among poor families remained at 2.2 percent in May or the same as April’s, the PSA noted that “annual growth rates were higher in the indices of the following food groups during the period: other cereals, flour, cereal preparation, bread, pasta and other bakery products, 2.9 percent; milk, cheese and eggs, 4.5 percent; oils and fats, 2.1 percent; and fruits, 11.6 percent.