Inflation possibly down anew in October
Credit to Author: Anna Leah E. Gonzales| Date: Sun, 03 Nov 2019 16:24:17 +0000
The country’s inflation rate possibly continued to ease in October on the back of lower rice and oil prices, analysts polled by The Manila Times said.
Projections for the month ranged from 0.8 to 0.9 percent with a 0.8- percent average, slightly down from the 0.9 percent recorded in September.
It was however significantly lower compared to the 6.7-percent inflation rate in October last year.
The Bangko Sentral ng Pilipinas earlier projected inflation to settle within 0.5 to 1.3 percent.
The Philippine Statistics Authority (PSA) is set to release official October inflation data on November 5.
An economist from the University of Asia and the Pacific said inflation likely hit 0.9 percent in October.
“Minor upticks in food prices, while fuel prices lower to stable plus base effects,” said Victor Abola.
ANZ Research and analysts from Rizal Commercial Banking Corp. (RCBC) and Philstocks Financial Inc. all projected October inflation to settle at 0.8 percent.
“On a sequential basis, food prices contributed positively, although prices of key items such as rice have been muted. The Manila Electric Co. announced an increase in electricity rates in October, the first time in five months,” said ANZ Research in a report.
PSA data showed the average retail price of regular milled rice was at P37.22 per kilogram (kg) as of the second week of October, down by 18.6 percent from the P45.71/kg in the same week last year.
Manila Electric’s per kilowatt-hour (kWh) rate for households consuming 200 kWh monthly increased by P0.0448 last month.
“Meanwhile, reduced domestic fuel prices likely provided a modest relief to consumers. However, headline inflation should pick up slightly in the last two months of the year as the low base effect begins to fade,” said ANZ Research.
Energy firms implemented a price rollback of 25 to 40 centavos per liter for gasoline, 10 to 15 centavos/liter for diesel and 25 centavos/liter for kerosene.
RCBC head of Economics and Industry Research Division Michael Ricafort, for his part, said that a stronger peso exchange rate against the US dollar helped eased inflation during the month.
“Local inflation could still continue to ease for the month of October 2019, largely due to the stronger peso exchange rate vs the US dollar that lowers import prices and overall inflation, lower global commodity prices such as crude oil mostly among two-month lows in October 2019 amid the global economic slowdown largely due to the lingering US-China trade war, lower prices of local rice and palay (unmilled rice) as the planned safeguard duties on imported rice was scrapped, and high base effects that will culminate in October 2019 that mathematically would still cause some easing as well as a possible bottom of year-on-year inflation for October 2019 before inflation starts to normalize slightly higher in the coming months,” Ricafort said.
Ricafort said, however, that risks factors include the slight uptick in the prices of electricity, global crude oil prices in the latter part of October 2019, and the African swine fever (ASF) that could affect meat prices.
“Global crude oil prices have hovered among two-month lows in most of October 2019, partly resulting to some rollback in local fuel pump prices, another factor that could cause some further slowdown in local inflation for the month of October 2019,” said Ricafort.
“On local risk factors to the relatively low inflation include the ASF that could potentially reduce local supply of pork and could cause some uptick in the prices of pork and alternative meat products amid some initial scare on pork and other pork-related products,” Ricafort added.
“External risk factors include any volatility in global crude oil prices partly brought about by plans by OPEC (Organization of the Petroleum Exporting Countries) members and their allies to reduce oil production output amid the global economic slowdown that fundamentally reduce global demand for oil amid increased global supply of oil due to increased US shale production and any geopolitical risks, especially those that involve Iran and other oil-producing countries in the Middle East,” he added.
Philstocks Financial Inc. senior research analyst Japhet Louis Tantiangco, meanwhile, explained the slower projection is from base effects.
“Last year, the CPI (consumer price index) peaked on October 2018, giving us a higher base for this October’s inflation,” said Tantiangco.
“The price growth deceleration is also due to the slowdown in money supply growth in the preceding months, stable rice prices, lower oil prices, and finally a stronger peso. On the flipside, inflation was supported by the higher utility rates primarily electricity rates,” he added.