Pricier food pushes inflation to 4-year high in September

Inflation in the Philippines heated up to 6.9 percent in September—its highest level in four years—from 6.3 percent in August, according to the Philippine Statistics Authority, raising the year-to-date or January to September average to 5.1 percent.

National Statistician Dennis Mapa said in a press briefing the latest readout was mainly driven by faster rate of increases in the sub-groups of food and non-alcoholic beverages; and housing, water, electricity, gas and other fuels.

Mapa said that, in particular, fast-increasing prices of foodstuffs like eggplant, tilapia and refined sugar as well as electricity, housing and wood fuel (firewood) contributed to the increase of overall inflation.

He said the September readout was last seen in September and October of 2018 at the height of the spike in the price of rice.

“Before that, inflation was higher than 6.9 percent at 7.2 percent way back in 2009,” Mapa said. “We had high inflation rates in the aftermath of the 2008 Asian financial crisis.”

Asked about the outlook for the remainder of the year, Mapa said that “of course, there was a risk” of even higher inflation considering the trend in food prices. He added that, on the other hand, there are also many items that might see slower rates of price increases.

Heaviest weight

Last September, inflation for food alone was pegged at 7.7 percent—meaning prices were that much higher compared to prices in September 2021. This was faster than the 6.5 percent overall inflation recorded in August.

The pace of rising prices in most food items could not be offset by slower increases in the prices of meat and slaughtered animals as well as fruits and nuts.

Commodity groups that showed faster price hikes include alcoholic beverages and tobacco; clothing and footwear; furnishings, household equipment and routine household maintenance; information and communication; recreation, sport and culture; restaurants and accommodation services; and personal care and miscellaneous goods and services.

Commodity groups that showed slower rates of price increases were health, transport and education services.

According to the Bangko Sentral ng Pilipinas (BSP), which aims to herd inflation within the range of 2 percent to 4 percent, the September outturn was well within its forecast for the month.

In fact, the readout was just below the midpoint of the BSP’s forecast range of 6.6 percent to 7.4 percent.

The BSP’s assessment is that inflation will remain above-target over the near term due to broadening price pressures and emerging signs of further adverse “second-round effects”—such as higher transport fares and higher wages.

Possible October peak

Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., said inflation could peak in October at around 7 percent, and then possibly ease afterward.

“Price pressures could come from the potential impact of higher global non-oil prices, pending petitions for further transport fare hikes, the impact of weather disturbances on prices of food items, as well as the sharp increase in the price of sugar,” the BSP said.

The regulator added that its policy rates have been rising in recent months, and the intended result is for inflation to slow down and for expectations of inflation in succeeding months to be close to the target range.

ING Bank and Goldman Sachs are both expecting the BSP to raise its key rate by 0.5 percentage point for the third time this year in November, to bring it to 4.75 percent.

Finance Secretary Benjamin Diokno said the government was intensifying measures to help increase the domestic supply by ramping up local production, ensuring timely importation of goods, fertilizers and raw materials, and improving distribution efficiency.

“The country needs to produce and import the needed commodities,” Diokno said. “Given regional production and price disparities, it is equally important that these goods are efficiently distributed. The government is already looking at regions where inflation is high and which goods are driving inflation to address any bottlenecks.”

Economic Planning Secretary Arsenio Balisacan said that despite the damage to crops brought by recent weather disturbances, the government expects sufficient supply of rice, chicken, highland vegetables, yellow corn and white corn throughout the year.