By Keisha B. Ta-asan, Journalist
ANNUAL INFLATION up sharply slowed down in October after two consecutive months of acceleration, reflThis would lead to lower prices of major food items, the Philippine Statistics Authority (PSA) said on Tuesday.
Preliminary PSA data showed a titer inflation fell to 4.9% in October compared to 6.1% in September and 7.7% in October 2022.
It was meantFislightly slower than the median estimate of 5.7% in a Business world poll last week. This figure was also lower than the Bangko Sentral ng Pilipinas’ (BSP) forecast of 5.1 to 5.9 percent for the month.
The latest inflation figure was the slowest pace in three months or since July’s 4.7%. However, October marked the 19th consecutive month in which inflation exceeded the central bank’s 2-4% target range.
Remove seasonalityffRegarding prices, the consumer price index (CPI) fell by 0.2% over one month.
For the 10 month period, inflation averaged 6.4%. This figure remains higher than the BSP’s forecast of 5.8% for the full year.
“If we don’t see shocks, supply shocks, our view is that inflThe vaccination rate will go down,” National Statistician Claire Dennis S. Mapa said in a brief speech.Fing Tuesday.
Core inflation, which excludes volatile food and fuel prices, slowed further to 5.3% in October from 5.9% in September. Year to date, core inflation amounted to 7%.
Mr Mapa said the sharp slowdown in inflation in October reflected falling food prices.
The heavily weighted food and non-alcoholic beverages index fell to 7% year-on-year in October, from 9.7% in September.
The food-only index also slowed to 7.1% in October from 10% the previous month. The deceleration of food inflThis situation is mainly explained by the fall in prices of vegetables and rice.
The annual growth of vegetables, tubers, plantains, cooking bananas and legumes slowed to 11.9% compared to 29.6% in September.
Rice inflation also declined to 13.2% in October from 17.9% in September, its highest level in 14 years.
Mr. Mapa said the average price of regular milled rice last month fell to P45.40 per kilogram from P47.50 in September. The average price of well-milled rice also dropped to P51 per kilo in October from an average of P52.70 a month earlier.
However, rice prices remained higher than last year, when prices of regular rice and well-milled rice stood at P39.70/kg and P44/kg, respectively.
“Rice inflProduction slowed after peak harvests and import arrivals. The stable supply of vegetables as the harvest season arrives has also resulted in a slower inflation rate of the commodity,” National Economic and Development Authority (NEDA) Secretary Arsenio M said. Balisacan, in a press release.
Additionally, Mr. Mapa noted that the foodflation contributed 2.5 percentage points (ppts) to the overall CPI basket.
Inflation in the following commodities has also slowed: Fifish (5.6% versus 6.1%), bread and other cereals (7.4% versus 8.1%), sugar (4.9% versus 9%) and meat (0.8% versus 1.3 %).
The inflThe consumption rate of food and accommodation services slowed to 6.3% in October from 7.1% in September, which Mr Mapa said was due to a high database.ffects, a reduction in food prices and a relaxation of public service prices.
Transport inflation also slowed to 1% in October from 1.2% a month ago, despite the increase in P1 jeepney fares. This is due to the drop in prices at the pump during the month.
In October, oil companies reduced pump prices of gasoline by P3.1 per liter, diesel by P0.45 per liter and kerosene by P4.40 per liter, according to department data Energy.
Other product groups that reported slower annual increases in October included alcoholic beverages and tobacco (9.3% compared to 9.8% in September) as well as furniture, household equipment and routine household maintenance (5 .3% versus 5.4%).
Faster inflation was observed in the clothing and footwear sector (4.8% versus 4.7%); and housing, water, electricity, gas and other fuels (2.6% versus 2.4%).
Meanwhile atflInflation in the National Capital Region (NCR) slowed to 4.9 percent in October from 6.1 percent in September, while inflation in areas outside Metro Manila slowed to 4 .9% compared to 6% the previous month.
All regions outside the NCR also recorded a slowdownflation rate, with the exception of Region VII (Central Visayas), which recorded a higher annual increase of 4.1 percent in October compared to 3.8 percent a month earlier.
Meanwhile, the month of OctoberflThe inflation rate for the lowest 30% of households with income slowed to 5.3%, compared to 6.9% in September and 8.9% last year. The 10-month average stands at 7.1%.
THREATS AND RISKS
For Mr. Mapa of PSA, title inflInflation will continue to fall in the coming months, barring a supply shock.
Mr. Balisacan said that although inflation eased in October, it remains crucial to monitor commodity prices, particularly food, transportation and energy, amid global challenges such as geopolitical uncertainties and the El Niño weather event.
“Furthermore, it is important to ensure that the most vulnerable sectors of society are protected and receive assistance, particularly as food prices remain high and we expect El Niño to continue. ‘worsen.and Fect local and global food production,” he said.
On the sidelines of the annual meeting of the Economic Society of the Philippines, Mr. Balisacan said November, December and January were good months for the agricultural sector as there were fewer typhoons.
However, demand would be high during the Christmas period, which could contribute to upward pressure on the domestic market.flation.
“(Inflation) could probably reach (2-4%) early next year,” he said. “We are now at 4.9%. If we can achieve an additional 1.2 percentage point reduction, we will now be in the 2-4% range. But we still want to see progress in reduction,” Mr. Balisacan said.
In a statement, the Department of Finance (DoF) said the government will continue to implement measures to ensure lower rice and vegetable inflation for the remainder of 2023. This includes the use of the programs of the Rice Competitiveness Enhancement Fund, as well as measures to control non-food inflation, such as managing the demand and supply of energy and water, careful consideration of wage increases and transportation rates, and control of the suspension of pass-on fees for delivery trucks.
“This ensures the protection of the purchasing power of the most vulnerable families and the continued provision of essential services such as public transportation and agricultural activities,” said Finance Secretary Benjamin E. Diokno.
BREAK BSP?
Aris Dacanay, HSBC ASEAN economist, said inflation will continue to slow down in the coming months due to the base eand Fects and the fall in world rice prices.
“Barring any new and unexpected supply shocks, we expect the BSP to keep interest rates steady at 6.5% in the next Monetary Board meeting, while maintaining a hawkish tone,” a- he declared in a note.
Last week, the BSP raised borrowing costs by 25 basis points (bps) amid oand F-evolution of the cycle, bringing the key rate to a new 16-year high of 6.5%. The BSP has raised its policy rates by 450 basis points since May 2022.
The next BSP policy development meeting is scheduled for November 16.
However, even if inflation returns to the target range of 2-4%, headline CPI could rise again, Dacanay said.
“Our base case scenario projects average inflation above 4% in the second quarter of 2024.flation flare increasing will be the expiration of Executive Order No. 10, an order that temporarily reduces the tariffff rates for rice, corn, coal and pork,” he said.
“We estimate its expiration to add 1.4 ppt to the inflfuture prospects. As expected, this will likely lead the BSP to maintain high policy rates for an extended period. We expect rate cuts to only begin in the third quarter of 2024,” he added.
Miguel Chanco, chief economist for emerging Asia at Panthéon Macroeconomics, said in a note that achieving the 2 to 4 percent inflThe emissions reduction target is still achievable by the end of the year.
“It is not surprising, from our perspective, that today’s report shows a dramatic turnaround in food inflation,” he said. “We expect this turnaround to continue into early next year, especially as base effects remain quite favorable.”
Mr. Chanco said the BSP may start cutting policy rates in the future. Fifirst quarter of 2024, with a total easing of 100 basis points next year.
The BSP projects full-year inflation to reach 5.8% for 2023, before slowing to 3.5% in 2024 and 3.4% in 2025. But offiofficials said they would likely revise theirflation forecast on November 16. — with contributions from Luisa Maria Jacinta C. Jocson