July inflation accelerated to six-month high of 2.7%

Inflation in July accelerated to a six-month high of 2.7 percent from 2.5 percent in June and 2.4 percent a year ago, fueled by faster increases in the indices of transport, tobacco and utilities, the Philippine Statistics Authority said Wednesday.

The figure brought the average inflation in the first seven months to 2.5 percent, below the midpoint of the target range of 2 percent to 4 percent for the year.

“The Philippines’ headline inflation continued to exhibit a faster pace as it picked up to 2.7 percent in July 2020… The acceleration in the overall inflation was mainly caused by the jump in the inflation of the transport index at 6.3 percent during the month, from 2.4 percent in June 2020,” the PSA said.

Annual increments were also observed in the indices of alcoholic beverages and tobacco at 19.3 percent; housing, water, electricity, gas, and other fuels, 0.8 percent; and, restaurant and miscellaneous goods and services, 2.5 percent.

Core inflation went up to 3.3 percent in July from 3 percent in June and 3.2 percent a year earlier. Inflation for the food index at the national level continued to decelerate to 2.5 percent in July from 2.7 percent in the previous month. In July 2019, food inflation was registered at 1.7 percent.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the July inflation was within the BSP’s forecast range of 2.2 percent to 3.0 percent for the month.

“The latest inflation outturn is consistent with the BSP’s prevailing assessment that inflation is expected to remain benign over the policy horizon due largely to the potential adverse impact of COVID-19 on the domestic and global economic prospects,” Diokno said.

“The latest baseline forecasts indicate that inflation is likely to settle close to the mid-point of the government’s target range of 3.0 percent ± 1.0 percentage point [2 to 4 percent] for 2020 to 2022,” he said.

Diokno said the contraction in domestic economic activity was seen to have bottomed out in the second quarter of 2020. “For the rest of year, output is expected to decline at a slower pace as firms and households gradually adjust to post-pandemic conditions. GDP growth is expected to recover in 2021 as government policy support measures fully gain traction.”

He said the policy-setting Monetary Board would consider the latest inflation outlook along with the release of second-quarter 2020 GDP at the upcoming monetary policy meeting on Aug. 20.

Diokno said the BSP was ready to deploy all available measures in its toolkit to fulfill its policy mandate as it continued to assess the impact of the global health crisis on the domestic economy.

The National Economic and Development Authority said the national and local governments should strengthen risk management systems to ensure an unhampered and sufficient supply and delivery of essential commodities that would support a stable inflation.

“Although we expect that the overall consumer prices will remain benign until 2021, we recognize that the upside risks to the inflation outlook still remain,” acting Economic Planning Secretary Karl Kendrick Chua said.

“We need to remain vigilant and ensure that strategies are well-placed to ensure stable supply and delivery of essential commodities in all parts of the country,” he said.

The PSA on Wednesday revised downward the first-quarter GDP growth to -0.7 percent from the preliminary figure of -0.2 percent. The PSA revises the GDP estimates based on an approved revision policy (PSA Board Resolution No.1, Series of 2017-053) which is consistent with international standard practices on national accounts revisions.

Topics: inflation , Philippine Statistics Authority , Bangko Sentral ng Pilipinas , BSP Governor Benjamin Diokno
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