Inflation likely hit 9-year high in August

Inflation likely climbed to a new high in more than nine years in August and breached 6 percent year-on-year as food and fuel prices remained elevated last month.

Economists polled by the Inquirer last week projected the rate of increase in prices of basis goods and services to have settled between 5.8 percent and 6.1 percent.

Within this range of forecasts, headline inflation will be the fastest since the 6.6 percent posted in March 2009, based on the Philippine Statistics Authority’s backlisted values for inflation using 2012 consumer prices as base. The recomputed figures were released last week.

ING Bank Manila senior economist Joey Cuyegkeng and Pauline May Ann E. Revillas of Metropolitan Bank and Trust Co.’s research department had the highest forecast of 6.1 percent, which the latter attributed to increases in the prices of food, utilities and petroleum products.

“Domestic supply bottlenecks resulted in higher prices of food items like rice, meat and vegetables. On the other hand, higher electricity rates and increases in pump prices drove the rise in nonfood inflation,” Revillas explained.

“Peso weakness also contributed to price pressures,” Cuyegkeng added.

The peso remained at the 53:$1 level, a 12-year low.

Ateneo de Manila University economics professor Alvin P. Ang’s projection was 6 percent “due to supply constraints in food as a result of weather and delayed importation of rice, and adjustments in power rates.”

Bank of the Philippine Islands vice president and chief economist Emilio S. Neri Jr., Rizal Commercial Banking Corp.’s Michael E. Ricafort and Capital Economics Asia economist Alex Holmes shared the same forecast of 5.9 percent.

Neri said that while fish and fuel prices accelerated last month, utilities and rice prices slowed month-on-month.

“Surge in global oil prices has been the main driver of inflation with WTI crude up by 34 percent as of end-August to $66.33 a barrel from $49.42 a year ago. This is the biggest annual increase in global oil prices since 2008, the same year inflation settled at 8.2 percent,” Neri noted.

For Ricafort, “inflation could have peaked already in August and could slow down thereafter, and further normalize lower in 2019, a year after the TRAIN law’s implementation,” referring to the Tax Reform for Acceleration and Inclusion Act.

Land Bank of the Philippines market economist Guian Angelo S. Dumalagan, meanwhile, projected a 5.8-percent inflation in August.

“The continued effect of the TRAIN law, which raised the prices of fuel, automobile, minerals and coal, as well as the further weakening of peso against the greenback may have also boosted local inflation” last month, Dumalagan said.

Dumalagan shared the same view with Ricafort that after peaking in August, headline inflation was expected to gradually drop beginning September.