January inflation at 8-month high

Higher food prices partly as a result of the eruption of Taal Volcano and the new sin tax rates jacked up inflation to an eight-month high of 2.9 percent year-on-year in January, the government reported on Wednesday.

Amid Taal’s activity and the outbreak of the novel coronavirus (2019-nCov) last month, the latest Philippine Statistics Authority (PSA) data showed that prices of personal care—including face masks—and health products such as vitamin supplements, medicines and rubbing alcohol remained stable that month despite reports of hoarding and lack of supply.

Prices of health and personal care products rose 2.9 percent and 1.7 percent year-on-year, respectively, in January, both flat compared to a month ago, said Assistant PSA National Statistician Divina Gracia del Prado.Health products accounted for 3.89 percent of the consumer price index basket, while personal care products comprised a mere 0.36 percent, PSA data showed.

National Statistician Claire Dennis Mapa said the biggest contributors to the uptick in headline inflation last January—the highest since May 2019’s 3.2 percent—included the faster hikes in transport costs, specifically petroleum, fuel and ferry/ship fare; higher prices of alcoholic beverages and tobacco products, and increases in prices of charcoal, kerosene and LPG that month.

The third tranche of the oil excise hikes under the Tax Reform for Acceleration and Inclusion Act took effect on Jan. 1, alongside the implementation of two laws that jacked up sin taxes slapped on cigarettes, heated tobacco, vaping products and alcoholic drinks.

Mapa said prices of beef, chicken, fish and vegetables also picked up as a result of the eruption of Taal Volcano, which affected farms in the Calabarzon region.

As for rice, Mapa said retail prices dropped 6.5 percent year-on-year in January—the ninth straight month of decline—given the liberalized importation of the Filipino staple food under the rice tariffication law.

Among the bottom 30-percent income households, inflation rose to 2.6 percent in January from 2.1 percent a month ago, although lower than 4.9 percent a year ago, Mapa said.

The PSA already rebased the inflation rate for poor families to the year 2012, similar to that of headline inflation, from a base year of 2000 previously.

The government targets headline inflation this year to settle within the 2-4 percent range.

Last year, the rate of increase in prices of basic commodities averaged 2.5 percent, the lowest in three years, or since the 1.3 percent posted in 2016.

Despite the relatively stable inflation outlook, Socioeconomic Planning Secretary Ernesto Pernia said “we cannot be complacent, as the balance of risks remains on the upside for 2020 due to the effects of the Taal Volcano eruption, the spread of the African swine fever (ASF) and the 2019-nCov.”

“We remain attentive to recent developments abroad, which could affect domestic pump prices. Over the medium to long term, it is essential for the country to explore alternative and cheaper energy from local sources to become less import-dependent,” Pernia said in a statement.

Specifically to control the spread of ASF that makes pork supply tighter and prices higher, Pernia said that “at the local level, biosecurity and border control measures are being strengthened and regulation on the movement of pork products are strictly enforced around the country.”