Analysts see higher November inflation
Credit to Author: Anna Leah E. Gonzales| Date: Sun, 01 Dec 2019 16:12:23 +0000
The country’s inflation rate accelerated in November from the dissipating base effects and higher prices of food and power, analysts polled by The Manila Times said.
Projections for the month ranged from 1.2 to 1.3 percent with a 1.3- percent average, higher than the 0.8-percent inflation rate posted in October 2019.
The forecast was, however, still significantly lower than the 6.0 percent recorded in November last year.
The Bangko Sentral ng Pilipinas (BSP) earlier projected inflation to settle at 0.9 to 1.7 percent in November.
Official November inflation data is set to be released by the Philippine Statistics Authority (PSA) on December 5.
Analysts from Security Bank Corp. (SBC), ING Bank Manila, and Regina Capital Development Corp. all projected inflation to hit 1.3 percent.
SBC chief economist Robert Dan Roces said their forecast range is at 1.0 to 1.6 percent.
“Month-on-month price growth is estimated to be at 0.3 percent as higher demand at the onset of the holiday season caused price spikes for certain goods and services, which in turn offset the strength of the Philippine peso for the month,” Roces said.
“Our estimate also validates the view that inflation levels in October have bottomed-out relative to 2018’s peak. The main causes of last year’s price spikes have been muted: global crude prices have relatively been stable for the month, while fulfillment of shipments for imported rice plus local harvests ensure more than enough supply of rice in the market,” he added.
Roces said SBC expects inflation to settle at below 2.0 percent in December while full-year rate is forecast to hit 2.5 percent.
“This remains consistent with the prevailing assessment of a benign inflation outlook over the policy horizon for the rest of the year,” he said.
ING Bank Manila senior economist Nicholas Antonio Mapa, meanwhile, said the inflation rate will continue to be weighed down by food, transport and utilities.
He said, however, that while pork prices declined, an uptick was recorded for other meat products.
“We did notice a drop off in pork prices while substitutes such as beef, dressed chicken, and select fish items were pricier as consumers switched to these other forms of protein,” said Mapa.
“Meanwhile, unleaded gasoline and diesel prices are lower in November 2019 versus 2018 while Meralco rates, up from the previous month, were also lower compared to their year ago level,” he added.
The Manila Electric Co.’s per kilowatt-hour (kWh) rate for households consuming 200 kWh monthly increased by P0.4717 this month.
Petroleum companies, on the other hand, raised the prices of gasoline by 80 to 85 centavos per liter while liquefied petroleum gas prices also went up by 24 to 30 centavos per 11-kilogram cylinder.
“Inflation will continue to normalize as base effects wash out but price pressures appear well contained, affording the data-dependent BSP Governor (Benjamin) Diokno some scope to ease policy rates further to give growth an added push to chase the higher 6.5- to 7.5-percent growth target,” said Mapa.
Regina Capital Development Corp. head of sales Luis Limlingan, for his part, however, believes the BSP would continue to be “data dependent” in terms of policy rates.
Lower forecasts
Analysts from Rizal Commercial Banking Corp. (RCBC) and Philstocks Financial Inc. offered the lowest forecast of 1.2 percent.
“Diminishing inflation base effects starting November 2019 may mathematically lead to slight uptick in year-on-year inflation rate in the coming months but still considered relatively low,” said RCBC head of Economics and Industry Research Division Michael Ricafort.
The RCBC research head said lower prices of rice and relatively stronger peso exchange rate were offset by some uptick in global crude oil prices, slight increase in electricity rates, and higher prices of chicken and other alternative meat products due to the African swine fever (ASF), and higher prices of some food times as demand seasonally increases as the Christmas season draws closer.
“In the run up towards the Christmas season, some prices of food items such as meat products, seafoods, fruits, etc. already picked up and could still pick up, though temporarily during the Christmas holiday season, due to increased seasonal demand by consumers,” said Ricafort.
Ricafort, however, said the government’s non-monetary measures such as the Rice Tariffication Law could help ensure that inflation would continue to settle within the government’s 2.0- to 4.0-percent target range.
Japhet Louis Tantiangco, research analyst at Philstocks Financial Inc., meanwhile, also agreed that a slight uptick in headline inflation is likely from waning base effects.
“Base effects are starting to wane given that it was November last year when the CPI (consumer price index) started to decline. We also have higher oil prices and electricity rates,” said Tantiangco.
The Philstocks research analyst said food items are also expected to add inflationary pressure, especially those considered as substitutes to pork such as chicken and beef.
“This is amid the ASF outbreak. On a positive note, we had stronger pero this November which is seen to partially offset our inflation’s acceleration,” said Tantiangco.