May inflation pegged at slower 6%

Private-sector analysts expect May inflation in the Philippines to recede further from 6.6 percent in April to 6 percent, which is near the lower end of the range forecast by the Bangko Sentral ng Pilipinas (BSP).

In a commentary, ING Bank forecast a 6-percent readout in May, saying they believed that headline inflation in the Philippines will continue to cool on a year-on-year basis as favorable base effects help push the headline number back toward target.

This means that prices last year were at such high levels that the gap with current prices would be smaller.

“Core inflation, on the other hand, could prove to be tricky as domestic demand remains robust,” ING Bank said. This “may inch lower to 7.5 percent” in May from 7.9 percent in April.

Core inflation excludes goods and services whose prices change more quickly, such as food and energy.

Global prices

The United Nations noted that prices of food remained high across the globe even if agricultural prices have been declining over the past year.

At Security Bank Corp., chief economist Robert Dan Roces also penciled in 6 percent, with a forecast range of 5.8 percent to 6.2 percent. The official May inflation figure is expected to be released on June 6.

Gov’t interventions

Roces noted that government interventions and importation have helped temper food prices, but high fuel prices and a depreciating Philippine peso led to higher costs for power generation.

“Strong demand for certain goods and services has also put upward pressure on prices and may cause core inflation to remain elevated and above the headline,” he added.

Meanwhile, Jonathan Ravelas, managing director of eManagement for Business and Marketing Services, is forecasting higher at 6.3 percent.

Jean de Castro, head of fixed income at Manulife Investment Management and Trust Corp., said they expect negative base effects in the coming months to significantly result in slower inflation data, in line with the BSP inflation forecast.

“Looking ahead to the fourth quarter, local inflation can be expected to fall within the BSP’s 2 percent to 4 percent target range, barring any sharp increases in global oil prices,” De Castro said.

According to the Food and Agriculture Organization of the UN, its FAO Food Price Index declined in May amid significant drops in quotations for most cereals, vegetable oils and dairy products. However, prices of rice, sugar and meat increased.

The UN-administered Agricultural Market Information System (Amis) said that while agricultural prices have declined over the past 12 months, food price inflation remains high.

“FAO’s food price index is down 20 percent from year-ago levels. Yet, double-digit food inflation rates are reported in many countries around the world,” the Amis said.

“Food inflation remains elevated in part because of the strong US dollar, which has kept commodity prices high in local currencies, and because post-farm gate costs such as energy, transportation, and food manufacturing costs, which account for a large share of the retail price, remain high due to core inflationary pressures,” it added.