Inflation rate accelerated to a three-month high of 3.1 percent in August from 2.8 percent in July, driven by higher prices of food, transport, water, electricity and fuel, the Philippine Statistics Authority said Tuesday.
The August print was also faster than the 1.8-percent consumer price increase a year ago. Data from the PSA showed inflation averaged 3 percent in the first eight months, the midpoint of the government’s target range of 2 percent to 4 percent for the whole year.
Economic Planning Secretary Ernesto Pernia said inflation was still expected to remain within the government’s target, despite its acceleration for the second time in a row.
“Nonetheless, we should continue to closely monitor upside and downside risks,” Pernia said.
Standard Chartered Bank’s economist for Asia Chidu Narayanan said the manageable inflation environment would allow the Bangko Sentral ng Pilipinas to keep steady its policy rates steady for the rest of the year.
Narayanan shared Bangko Sentral’s view that inflation could be faster in 2018, driven by the government’s proposed tax increases.
“Based on the details, we think that BSP should still be comfortable with inflation, to keep rates on hold through this year,” Narayanan said.
DBS Bank of Singapore said that without any surge in demand-pull inflationary pressures, full-year inflation might remain around the 3-percent level.
“We reckon that it is likely to remain thereabouts in 2018 as well,” DBS said.
Bangko Sentral Governor Nestor Espenilla Jr. said he continued to see a manageable inflation outlook over the policy horizon, after taking into consideration the August inflation.
“The inflation path will be supported by favorable outlook for domestic economic activity with appropriate liquidity conditions and well-anchored inflation expectations,” Espenilla said.
Espenilla said the within-target path of inflation provided the BSP with the flexibility to assess its monetary tools to enhance further its responsiveness to the evolving requirements of the economy.
Food inflation rose to 3.7 percent in August from 3.4 percent in July. This was led by faster price increases in vegetables, fish, corn, flour, bread and other cereals.
“One cause is typhoon Jolina last month, which affected agriculture in Central Luzon, particularly in Aurora,” Pernia said.
Data showed that the indices of alcoholic, beverages and tobacco increased 6.3 percent; housing, water, electricity, gas and other fuels (2.8 percent); transport (4.4 percent); communication (0.3 percent); recreation and culture (1.4 percent); and restaurant and miscellaneous goods and services (2.2 percent).
The rest of the commodity groups either had slower annual add-ons or retained their previous month’s rates.
“Faster annual increments were observed in the indices of other cereals, flour, cereal preparation, bread, pasta and other bakery products at 1.7 percent; fish, 9.2 percent; and food products not elsewhere classified, 0.7 percent. In addition, the corn index posted an annual growth of 0.4 percent from -0.1 percent and vegetables index, 3.6 percent from -0.3 percent,” the PSA said.
Annual upticks in the other food groups were either slower or remained at their previous month’s rate with the index for sugar, jam, honey, chocolate and confectionery still registering a negative annual adjustment at -2.7 percent.
Pernia said the continuing surge in domestic petrol prices, coupled with depreciation of the peso against the US dollar, might exert upward pressures on inflation, leading to increases in the cost of electricity, gas and other fuels in the near term.
Externally, the disruption of economic activities in the United States triggered by Hurricane Harvey might also temporarily impact global economic activity, dampen supplies of energy, and push world oil prices up, he said.
“The impact of Hurricane Harvey on US oil production could exert upward pressures on world oil prices and could translate to higher domestic prices of petroleum. Any significant increases in domestic oil prices could push up transport and electricity inflation in the country in the near term,” he said.
Pernia said this could be offset by higher domestic productivity in agriculture and stable commodity prices with favorable weather conditions.