December inflation seen within gov’t target

Inflation likely remained above 3 percent in December due to a spillover effect on food prices of the damage wrought, especially on agricultural goods, by a string of strong typhoons that battered the country from October to November.

Six of nine economists who responded to the Inquirer’s poll last week projected last month’s rate of increase in prices of basic commodities at 3 percent or higher, following November’s spike to 3.3 percent.

The government will release its December and full-year 2020 inflation report on Tuesday, Jan. 5.

ING’s Nicholas Antonio Mapa had the highest forecast of 3.4 percent year-on-year, “driven by some follow-through food price inflation caused by recent storm damage.”

“Higher transport costs will also push headline inflation higher. Tepid demand in a time of COVID-19 will offset cost-push pressure to some extent,” Mapa said.

Moody’s Analytics’ Steven Cochrane projected a range of 3 to 3.3 percent, citing that “the food index can be quite volatile, due to factors such as weather and by lingering pandemic factors.”

“As we move farther away from the devastating typhoons and the strict pandemic quarantines, food prices are likely to ease a bit,” Cochrane said.

ANZ’s Kanika Bhatnagar, Security Bank’s Robert Dan Roces and UnionBank’s Ruben Carlo Asuncion projected 3.1 percent.

For Bhatnagar, transport prices were likely the primary driver of inflation as parts of the country remained under COVID-19 quarantine, hence the limited mass transportation options.

“Note that 3.1 percent is at the midpoint of the government’s inflation target of 2 to 4 percent, manageable but the seasonal inflationary pressures, we think, were highly present,” Asuncion said.

BDO Unibank’s Jonathan Ravelas had a forecast of 3 percent.

The three other economists projected December inflation below 3 percent: 2.9 percent for Ateneo de Manila University’s Alvin Ang; RCBC’s Michael Ricafort, 2.6 percent, and University of Asia and the Pacific’s Victor Abola, 2.5 percent.

Amid the festive holiday season, Ang said “some activities helped pull up confidence, but ample stocks more or less compensated so prices did not spike higher.”

Abola and Ricafort, meanwhile, said the higher print in November was transitory and likely dissipated by December.

“Seasonal increase in demand and spending in preparation for the Christmas and New Year holidays could have correspondingly caused some uptick in prices of noche buena products such as pork/meat products and other food/agricultural products, amid the adverse effects of the African swine fever in terms of reduced supply of pork products,” Ricafort noted.

“Rice prices are stable to slightly down. This would more than offset the rise in fuel prices due to higher crude oil prices abroad,” Abola said. —Ben O. de Vera INQ