Times survey: Inflation seen below 2% in Aug
Credit to Author: ANNA LEAH E. GONZALES| Date: Sun, 01 Sep 2019 16:13:54 +0000
INFLATION likely eased further to below 2 percent last month on the back of lower rice, fuel and power prices, according to analysts polled by The Manila Times.
Results of the survey showed projections of consumer price growth for August ranged from 1.7 percent to 1.9 percent with a 1.8 percent average, down from 2.4 percent in July and 5.7 percent a year ago.
The Bangko Sentral ng Pilipinas (BSP) earlier projected inflation for the month to settle between 1.3 percent and 2.1 percent.
The Philippine Statistics Authority will release official August inflation data on September 5.
Analysts from ING Bank Manila and Philstocks Financial Inc. see the rate of the increase in the prices of good and services last month decelerating to 1.9 percent, the highest among those polled.
“With supply pressures abating very quickly, inflation has come off just as rapidly to fall even below the 3 percent [+/-1] percentage point target of the BSP. More favorable oil prices also contributed to the deceleration….” ING Bank Manila senior economist Nicholas Antonio Mapa said.
Oil companies last week cut gasoline and diesel prices by 10 centavos per liter.
“Better weather conditions and [food imports] will push the food basket close to deflation, with likely negative growth for rice and vegetables only partially offset by modest inflation for meat, fish, chicken items and fruits,” he added.
According to him, lower global oil prices are also expected to lead to disinflation in both utilities and transport.
“[I]t is now widely expected that inflation will slide below…2 percent…for [the next two to three] months — opposite the peak of the 2018 inflation episode — before settling back within target for the rest of 2019 and through to 2020,” the ING Bank Manila economist said.
“The rapid deceleration in prices shows how quickly inflation fades if price pressures emanate from the supply side — further evidence that the heavy-handed 2018 rate hike cycle can and should be dialed back sooner rather than later to limit its adverse impact on growth. now that the inflation specter has been tamed for the time being,” he added.
Philstocks research associate Japhet Louis Tantiangco said that, besides the lower prices of rice and utilities, the inflation slowdown could be attributed to last year’s high base.
PSA data showed that rice prices continued to decline in the second week of August, with the average price of regular milled rice dropping by 9.8 percent from P38.38 per kilogram the week before.
The Manila Electric Co. slashed rates by P0.42 per kilowatt-hour earlier this month.
For their part, ANZ Research and Rizal Commercial Banking Corp. (RCBC) saw inflation settling at 1.8 percent.
In a report, ANZ Research said that, while food prices likely rose last month, local fuel and electricity prices likely fell.
“Despite the sequential rise, a high base effect should see annual inflation [easing] further to 1.8 percent [year-on-year]….” it added.
Inflation is expected to continue easing in the coming months on the back of higher base effects, ANZ Research said, adding that the central bank would likely cut interest rates by another 25 basis points in November.
Meanwhile, RCBC Economics and Industry Research Division Corporate Planning Group Head Michael Ricafort attributed easing inflation to lower prices.
“Major catalysts for the lower inflation estimate for August 2019 are lower rice prices with the Rice Tariffication Law; lower prices of other food items with the onset of the rainy season [after mild El Niño-caused drought; and] the government’s non-monetary measures since the latter part of 2018 to increase imports of some food items to lower prices, lower global and local oil prices, lower electricity rates in recent months, higher base effects that mathematically lead to slower year-on-year inflation,” he said.
“Inflation for the rest of 2019 would likely [approach] 1 percent levels from August to November 2019, with the slowest [at] near 1 percent around September [and] October 2019…due to the high base effects,” Ricafort added.
Regina Capital Development Corp., offered the lowest forecast at 1.7 percent, with head of sales Luis Limlingan saying that possible risks to inflation include foreign exchange fluctuations; the escalating trade war between the United States and China; volatile oil prices; and unpredictable weather, which could destroy crops.