Inflation accelerated to a three-month high of 2.5 percent year-on-year in October, from 2.3 percent in the previous month, driven by a combination of higher food prices, bigger tuition expenses and the still elevated transport costs.
The rate of increase in the prices of basic commodities last month brought the end-October headline inflation average to 2.5 percent, well-within the government’s 2-4 percent target range.
Despite the October uptick, the Bangko Sentral ng Pilipinas (BSP) said the pace of increases in the prices of basic commodities and services would likely stay muted over the short term due to weak demand both locally and abroad, given the lingering economic effects of the coronavirus pandemic.
“The October 2020 inflation was within the BSP’s forecast range of 1.9-2.7 percent,” BSP Governor Benjamin Diokno said. “The latest inflation outturn is consistent with the BSP’s prevailing assessment of favorable inflation dynamics over the policy horizon.”
“The balance of risks continues to lean toward the downside due largely to the impact on domestic and global economic activity of possible deeper economic disruptions caused by the pandemic,” Diokno explained.
Philippine Statistics Authority (PSA) data released on Thursday showed that consumer prices in October inched up by 0.4 percent compared to September levels.
National Statistician Claire Dennis Mapa told a press conference that prices of meat and fish rose by a faster 4.7 percent and 3.7 percent year-on-year, respectively, last October.
In particular, the tight supply of pork amid the African swine fever scare pushed food prices up, Mapa said.
As such, the heavily weighted food index rose by 2.1 percent in October, cutting short five straight months of decelerating rate, the PSA said in a report.
In the case of rice, last month’s prices remained lower by 0.5 percent year-on-year nationwide, even as the cost of buying the Filipino staple food in Metro Manila inched up by 1.9 percent.
Mapa said prices of regular and well-milled rice were on the rise in the National Capital Region partly due to lower volume blamed by traders on supply chain bottlenecks. In contrast, the more expensive special rice varieties saw prices ease amid abundant supply, Mapa said.
With the start of classes moved to October, the cost of enrolling especially in private high schools and colleges or universities also added to the inflation pressure, Mapa said.
The gradual reopening of the economy likewise added to the inflation uptick—for instance, the cost of barbershop services rose by 7.6 percent in October from 7 percent in September, while the lack of mass transportation kept transport costs elevated.
Tricycle fare jumped 45.8 percent year-on-year last month; jeepney fare, up 6.4 percent, and bus fare, up 4.1 percent, Mapa said.
Meanwhile, core inflation—which excludes selected volatile food and energy items to measure underlying price pressures—eased to 3 percent year-on-year in October from 3.2 percent in September.
As food and transport prices were elevated, the bottom 30-percent households had to shell out more, with a faster inflation of 2.9 percent, also a three-month high among poor families.Food inflation rose 1.5 percent in October from 1.1 percent in September, while education costs also rose by 1.5 percent for the bottom 30-percent households, the PSA said in a separate report.
The October inflation figure was unable to capture the effects on prices of the weather disturbances that occurred toward the month’s end. Mapa said the impact of the typhoons specifically on agricultural goods would be felt in November.
In a statement, Acting Socioeconomic Planning Secretary Karl Kendrick Chua said the impact of the adverse weather conditions in recent months on the agricultural sector and food prices also posed upside risks to inflation.
Given these developments, Diokno said the Monetary Board would consider the latest inflation outturn and the upcoming release of the third quarter gross domestic product data in its assessment of the outlook for inflation and economic activity for the group’s interest rate setting meeting on Nov. 19.
“The BSP stands ready to deploy all available measures in its toolkit in fulfillment of its policy mandate as it continues to assess the impact of the global health crisis on the domestic economy,” he said.
Earlier, Diokno said he would likely keep policy rates untouched over the course of the next two quarters with real policy rates now negative at -0.25 percent, and after rolling out a series of aggressive rate cuts earlier this year.