Inflation uptick seen in June

Inflation likely inched up in June as food and oil prices picked up faster while most of the country moved to a less-restrictive COVID-19 general community quarantine (GCQ) last month.

Nine of the 13 economists polled last week by the Inquirer projected last month’s rate of increase in prices of basic commodities to be higher than May’s 2.1 percent.

The Philippine Statistics Authority will release the June inflation figure on Tuesday, July 7.

Banco De Oro Unibank’s Jonathan L. Ravelas had the highest headline inflation forecast of 2.5 percent year-on-year, while three economists—ING Bank Philippines’ Nicholas Antonio T. Mapa, Oxford Economics’ Makoto Tsuchiya and UnionBank of the Philippines’ Ruben Carlo O. Asuncion—shared the same projection of 2.3 percent.

“Food prices will be the main driver for the slight uptick in prices as select commodities tick higher on supply disruption owing to partial lockdown measures affecting production and distribution,” Mapa explained.

For Tsuchiya, “the combination of rising rice prices and dissipating base effect are seen increasing inflationary pressure in June.”

The decline in liquified petroleum gas and electricity costs may not be enough to offset the uptick in oil and basic commodity prices, Asuncion noted, noting that fuel prices have been rising during the past eight weeks.

Five economists projected 2.2-percent inflation in June—Capital Economics’ Gareth Leather, HSBC Global Research’s Noelan Arbis, Rizal Commercial Banking Corp.’s Michael L. Ricafort, Security Bank’s Robert Dan J. Roces as well as University of Asia and the Pacific’s Victor A. Abola.

“Businesses, consumers/households and other institutions could start to increase their respective spending again as lockdowns have been further eased/relaxed, thereby could fundamentally support some pick up in both demand and prices,” Ricafort said.

“Looser quarantine measures notwithstanding, consumption may likely be clustered around essential items for most of the second half, thus curtailing price pressures overall,” Roces, for his part, said.

Ateneo de Manila University’s Alvin P. Ang and Standard Chartered Bank’s Chidambarathanu Narayanan see last month’s inflation at 2.1 percent, similar to the rate in May.

Moving forward, Naranayan said he expected inflation “to edge down through the rest of the year, dropping to a low of 1 percent in December.”

Moody’s Analytics’ Steven G. Cochrane said headline inflation in June likely slowed to 2 percent year-on-year because “with the GCQ extended through the end of the month (and indeed now through July 15) in Manila and Cebu, demand for goods and services will remain soft, creating little upward pressure on prices.”

The lowest forecast of 1.9 percent was attributed by Sun Life Financial’s Patrick M. Ella partly to a smaller impact from the usual tuition being shelled out at the start of the school year. INQ