August inflation highest in more than 2 years

Inflation soared to a 32-month high of 4.9 percent in August as bad weather and higher transport costs pushed prices of fish and vegetables higher, the government reported on Tuesday.

The state planning agency National Economic and Development Authority (Neda) said the government was moving to ease high food prices by allowing fish imports and promoting urban agriculture.

Last month’s rate of increase in the prices of basic commodities was the highest since the 5.1 percent recorded in December 2018.

In the eight months to August, the inflation rate averaged 4.4 percent, above the government’s 2 to 4 percent target band.

The central bank on Tuesday brushed off the unexpected spike in the inflation rate for August, saying the pace of price increases for basic goods and services would normalize soon.

In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the latest figure was “consistent with the BSP’s assessment that inflation could settle close to the high end of the target range in the near term before decelerating back to within the target range by year end.”

Easing meat prices

“In 2022-2023, inflation will likely fall toward the midpoint of the target, supported by the continued and timely implementation of nonmonetary measures and reforms to address directly supply-side pressures on key food items,” he said in a mobile phone message to reporters.

The central bank chief said the risks to the inflation outlook remained “broadly balanced” over the policy horizon.

“The uptick in international commodity prices due to supply-chain bottlenecks and the recovery in global demand could lend upside pressures on inflation,” he warned, adding that the emergence of new COVID-19 variants, leading to stricter lockdown measures and delayed reopening of the economy, was seen to pose downside risks to both aggregate demand and inflation.

Month-on-month, consumer prices in August were 0.6-percent higher than July levels.

National Statistician Dennis Mapa told a press conference that meat remained expensive as prices rose 16.4 percent in August, but he said recent months’ meat inflation already eased compared to levels earlier this year when it hit 19-20 percent due to scarce pork supply resulting from the African swine fever (ASF) crisis.

“In particular, retail prices of frozen and fresh pork have fallen by around P19-38 per kilo from their peak, following the issuance of Executive Order (EO) Nos. 133 and 134,” which lowered import tariff and removed quotas to boost domestic supply, Neda said in a statement.

In the case of fish and vegetables, prices last month climbed 12.4 percent and 15.7 percent year-on-year, respectively, from 9.3 percent and 5 percent in July, PSA data showed.

Mapa said the uptick in fish prices had been ongoing for several months now due to limited supply.

Vegetable traders, meanwhile, had blamed the wet season as well as prevailing quarantine restrictions that made it more costly to deliver products across the country, Mapa said.

In all, prices of food and non-alcoholic beverages increased by a faster 6.5 percent in August from 4.9 percent in July.

Disadvantaged sector

Poorer Filipinos shelled out more for basic goods as inflation for the bottom 30-percent income households climbed to 5.2 percent, matching the rate recorded in January 2019, PSA data showed.

End-August inflation among poor families averaged 4.9 percent, higher than the national rate.

Socioeconomic Planning Secretary Karl Kendrick Chua noted that the Department of Agriculture (DA) was already addressing the fish supply shortage as it had issued Administrative Order No. 22 and a certificate of necessity to import 60,000 metric tons until yearend.

“The DA is also preparing to increase the (volume) should the initial imports not be sufficient to curb fish inflation. This is part of the government’s proactive monitoring to ensure sufficient supply and stable prices during the closed fishing season,” Chua said.

To support vegetable production through urban farming, the government will provide raw material resources, machinery and equipment, training and technical assistance, resiliency projects, and funding support, he added.

Chua said the shift to granular lockdowns would also help maintain price stability amid the prolonged COVID-19 pandemic.

“Keeping transportation available and affordable, while still following minimum public health standards, will help facilitate the movement of people, goods, and services. All these will allow people to safely earn income and keep prices stable,” the Neda chief said.