Despite Odette, January inflation seen within 2-4%

Inflation likely remained within the 2 to 4 percent target range for the second straight month in January despite spillover effects on consumer prices of last month’s Typhoon “Odette” onslaught and high oil costs.

All 21 forecasts collected by the Inquirer last week showed headline inflation below 3.9 percent.

The government’s January inflation report, whose consumer price index (CPI) basket of goods will be adjusted to base year 2018 from 2012 previously, would be out on Feb. 4. The majority of economists still used the old 2012 base in their January forecasts as they awaited the weights to be assigned by the Philippine Statistics Authority (PSA) in the updated CPI.

Six economists were able to provide estimates using the new 2018 base: Regina Capital’s Luis Limlingan, 3.2 percent year-on-year; Moody’s Analytics’ Sonia Zhu, 3 percent; University of Asia and the Pacific’s Victor Abola, 2.9 percent; Security Bank’s Robert Dan Roces, 2.8 percent; Oxford Economics’ Makoto Tsuchiya, 2.7 percent; and Bank of the Philippine Islands’ Emilio Neri Jr., 2.6 percent.

High base

Zhu said January inflation would factor in a high base from last year when food prices, especially of pork, climbed due to supply constraints. The rate of increase in prices of basic commodities averaged 4.5 percent in 2021, surging above the target band deemed by the Bangko Sentral ng Pilipinas (BSP) as manageable and supportive of economic growth, mainly due to expensive food amid the prolonged pandemic.

It was only last December when the monthly headline rate returned within target, at 3.6 percent year-on-year.

Abola said that while this month’s Omicron surge did not significantly impact on consumer prices, a big jump would be reflected on transport inflation as “fuel costs have risen beyond the September-October 2021 high averages.”

Global oil prices breached the $90-per-barrel mark last week.

Roces pointed to “upside food price pressures stemming from the impact of the typhoon mostly in the Visayas and Mindanao areas, plus an upward movement in the utilities basket on higher electricity and oil costs.”

Omicron impact

“Offsetting this is the impact of Omicron, which may have either steadied or exerted slight downward price movements in all the other baskets, including the heavyweight restaurants and accommodation basket plus the new personal care basket, as mobility regressed back to pre-November 2021 levels this month,” Roces said.

Using 2012 as base, ING’s Nicholas Antonio Mapa and Union Bank’s Ruben Carlo Asuncion forecasted 3.9 percent year-on-year; DBS’s Han Teng Chua and Philippine National Bank’s Alvin Joseph Arogo, 3.3 percent; Nomura’s Euben Paracuelles, 3.2 percent; ANZ’s Sanjay Mathur, Pantheon Macroeconomics’ Miguel Chanco, and Sun Life Financial’s Patrick Ella, 3 percent; Rizal Commercial Banking Corp.’s Michael Ricafort, 2.9 percent; Ateneo de Manila University’s Ser Percival Peña-Reyes and Standard Chartered’s Jonathan Koh, 2.8 percent; BDO Unibank’s Jonathan Ravelas, 2.7 percent, and Capital Economics’ Alex Holmes, 2.5 percent.

Goldman Sachs Economics Research projected January inflation at 3.4 percent with higher price levels this month than last month’s by 0.9 percent “due to higher fish and domestic gasoline prices.” HSBC Global Research’s forecast was 3.1 percent.

Last week, Socioeconomic Planning Secretary Karl Kendrick Chua said the government was monitoring the global increase in food prices. INQ