Inflation up slightly in June at 2.8%

Consumer prices rose at a slightly faster pace in June than in the previous month, triggered in part by the peso’s depreciation, an increase in prices of oil in the world market and higher demand for various commodities resulting from the opening of classes.

Despite the uptick, the average inflation remained below target in the first semester in what economic officials credited in part to rising local investments, which were pushing the supply of goods and services higher.

The National Statistics Office on Friday reported that the annual inflation rate settled at 2.8 percent in June compared with 2.6 percent in May.

This brought the average inflation in the first semester to 2.9 percent, still below the target of 3 to 5 percent set for this year and in 2014.

According to the NSO, the opening of classes during the month led to higher demand for certain commodities, thus increasing inflation marginally.

The uptick in prices was also attributed to the weakening of the peso, which naturally made imported goods more expensive in local currency terms. After averaging in the 40- and 41-to-a-dollar level in the previous months, the peso fell to the 43 level in June due to exit of some foreign portfolio investments.

Socioeconomic Planning Secretary Arsenio Balisacan said the depreciation of the peso was expected to cause faster inflation, but added that the increase in prices was seen to stay well within the target.

He said a minimal acceleration in inflation was a small price to pay given the benefits brought by a weaker peso, such as a boost to consumption by households dependent on foreign remittances and the improved price competitiveness of local industries that produce goods for markets overseas.

“The inflation rate in June was mainly driven by higher petroleum prices following an increase in the price of oil in the world market and the peso depreciation during the period. However, stable food prices on the back of abundant supply partially moderated the increase in inflation,” Balisacan said.

Data from the NSO showed that faster price increments in June were registered by alcoholic beverages and tobacco (up year-on-year by 31.2 percent in June from 31.1 percent in May), health goods and services (2.8 percent from 2.7 percent), transport goods and services (0.7 percent from 0.5 percent), recreation and culture (2.7 percent from 1.7 percent), and education (4.5 percent from 4.4 percent).

On the other hand, posting slower increase in prices were clothing and footwear (3.3 percent from 3.5 percent), household equipment and goods for household maintenance (3.3 percent from 3.7 percent), and restaurant and miscellaneous goods (2.1 percent from 2.3 percent).

The Bangko Sentral ng Pilipinas earlier said inflation was expected to remain modest at least through 2014 even as the economy sustained a robust growth rate.