Inflation in May slowed to a six-month low of 2.1 percent from 2.2 percent a month ago, pulled down mainly by the decline in the indices of transport, food and non-alcoholic beverages.
The Philippine Statistics Authority on Friday attributed the lower prices to the subdued demand amid the lockdowns implemented by the government to contain the spread of the COVID-19 pandemic.
The May inflation was significantly slower than 3.2 percent a year ago and brought the average in the first five months to 2.5 percent, well within the target range of 2 percent to 4 percent.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the May inflation was within the BSP’s forecast range of 1.9 percent to 2.7 percent for the month.
“Inflation has monotonically dropped from 2.9 percent in January to 2.6 percent in February to 2.5 percent in March to 2.2 percent in April and now to 2.1 percent in May. The latest inflation number is consistent with the prevailing assessment by the BSP that inflation is expected to remain benign over the policy horizon due largely to the adverse impact of the coronavirus pandemic on the domestic and global economy,” Diokno said in a statement following the release of the May print.
“… The volatility of oil prices remains a source of inflation risk. Meanwhile, global rice prices continue to increase owing to lower output among major rice producers in the Asean region amid the ongoing drought in the Mekong Delta,” he said.
The PSA said the slowdown in the headline inflation in May was mainly driven by the 5.6-percent annual drop in the transport index. The downtrend in the headline inflation was also brought about by the deceleration in the annual increments recorded in the indices of food and non-alocholic beverages, 2.9 percent; clothing and footwear, 2.4 percent; furnishing, household equipment and routine maintenance of the house, 4.1 percent; and recreation and culture, 1.4 percent.
On the contrary, a higher annual increase of 18 percent was noted in the index of alcoholic beverages and tobacco. The indices of the rest of the commodity groups such as housing, water, electricity, gas, and other fuels; health; communication; education; and restaurant and miscellaneous goods and services retained their previous month’s annual growth rates.
ING Bank Manila senior economist Nicholas Antonio Mapa said in a report subdued demand due to the lockdowns or community quarantine implemented by the government to contain the spread of the pandemic helped keep price gains in check for other items in the CPI basket.
Mapa said the decelerating inflation and the need to provide additional stimulus to an economy headed for a recession set up a possible BSP rate cut at the June 25 meeting of the Monetary Board as unemployment data surged to 17.7 percent in April 2020.
“BSP Governor Diokno continues to remind investors that he has ‘elbow room’ to cut policy rates due to the benign inflation environment although we believe that the central bank will carry out at most a 25 bps rate cut before pausing for the rest of the year to keep real policy rates positive,” Mapa said.
PSA data showed that unemployment rate rose to a record high of 17.7 percent, accounting to 7.3 million unemployed Filipinos in the labor force in April 2020.