Now at 16-month low, but Statistics Authority wary of rising rice prices
Inflation in July 2023 eased further to a 16-month low of 4.7 percent from 5.4 percent a month ago, pulled down by slower year-on-year increases in the prices of food and non-alcoholic beverages, housing, water, electricity, gas, and other fuels, the Philippine Statistics Authority (PSA) said Friday.
“This is the sixth consecutive month of deceleration in headline inflation and the lowest since March 2022 with an inflation of 4 percent,” National Statistician and Civil Registrar General Dennis Mapa said in an online briefing.
But Mapa said the agency would take a closer look at the trajectory of rice inflation in the coming months despite the downtrend in food inflation.
“Rice inflation in July 2023 stood at 4.2 percent from 3.6 percent in June 2023. Rice inflation has been increasing since February 2022. The weight of rice in the CPI (consumer price index) basket is around 9 percent,” he said.
“We will closely monitor this because it might be the main source of higher inflation in the future,” Mapa said.
The July 2023 inflation was also slower than the 6.4 percent a year ago, bringing the average inflation in the first seven months to 6.8 percent, still higher than the target range of 2 to 4 percent.
Inflation for food and non-alcoholic beverages stood at 6.1 percent in July 2023, down from 6.9 percent in the previous month.
Inflation for housing, water, electricity, gas, and other fuels was 3 percent, down from 4.8 percent in June 2023.
Inflation for transport also declined to -3 percent, down from -1.2 percent in June.
Core inflation, which excludes selected food and energy items, also decelerated to 6.7 percent in July 2023 from 7.4 percent in June 2023.
Based on PSA data, Mapa said the price of regular rice in July 2023 increased to P41.50 per kilo from P41.20 a month ago. Well-milled rice also increased to P45.50 in July from P45.20, while the price of special rice stood at P54.60 per kilo from P54.40 a month ago.
PSA data also showed that compared with their previous month’s inflation rates, higher annual increments were noted in the indices of corn at 5.0 percent from 4.6 percent; and vegetables, tubers, plantains, cooking bananas, and pulses at 17.3 percent from 12.8 percent.
Prices of vegetables could rise further in the coming months due to the impact of typhoons.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the current disinflation trend could be slowed down by higher minimum wages in Metro Manila, which could lead to higher prices of other affected goods and services.
“The recent increase in local rice prices, which account for nearly 10percent of the inflation/CPI basket, would also slow down the easing trend of inflation… at the very least,” Ricafort said.
He said some storm damage recently, especially in Northern Luzon, which is a major producer of rice, corn, and other food agriculturalproducts, would lead to reduced output that would lead to some pick up in agricultural prices.
Global crude oil prices which are hitting 3.5-month highs could drive up pump prices and overall inflation, he added.
The July 2023 inflation of 4.7 percent was within the Bangko Sentral ng Pilipinas’ forecast range of 4.1 to 4.9 percent for the month, consistent with the overall assessment that inflation would gradually decelerate back to the target range by the fourth quarter in the absence of further supply shocks.
“The balance of risks to the inflation outlook continues to lean towards the upside owing to the potential impact of additional transport fare increases, higher-than-expected minimum wage adjustments in other regions, persistent supply constraints of key food items, El Niño weather conditions, and possible knock-on effects of higher toll rates on prices of key agricultural items.
“Meanwhile, the impact of a weaker-than-expected global economic recovery remains the primary downside risk to the outlook,” BSP said in a statement.
Finance Secretary Benjamin Diokno said the latest inflation number supported the likelihood that inflation “might be within the 2 to 4 percent target range by the fourth quarter.”
National Economic and Development Authority (NEDA) Secretary ArsenioBalisacan said despite the continued downtrend in inflation, there must be vigilance amid the increasingly volatile weather disturbances as oil price increases and trade restrictions on food.
The Department of Budget and Management welcomed the lower July inflation rate.
“We interpret this as a highly encouraging development. Our economic team is anticipating a sustained decline in our national inflation rate. We assure our fellow citizens that we remain unwavering in executing strategies to maintain the inflation rate well within our target range,” Budget Secretary Amenah Pangandaman said.
Pangandaman attributed the continued decline in the inflation rate to the effectiveness of the current administration’s economic strategies.
She said the whole-of-government approach being implemented is “indeed demonstrating efficacy.”
Albay Rep. Joey Sarte Salceda welcomed the July 2023 inflation rate, saying the country’s economy is on track.
“At my last economic briefing for investors last July 26, I projected that inflation will be at this level, and will continue to decline to below 3 percent by the end of the year,” Salceda, who chairs the House ways and means committee, said.
“Clearly, that projection holds, and we are on track to meet the BSP’s 2-4 percent target band as early as October,” he added.
Salceda said one positive sign is that apart from slower inflation,”we are actually seeing disinflation or negative price growth in certain areas, including livestock—which means we should also see promising numbers in agriculture and food output for the Q2 GDP.”
He noted that transport costs are also cheaper this year than last year.