LOWER energy costs and prices of some food items could have pulled inflation down for a fourth straight month in August, analysts said.
The median forecast in a Manila Times poll was 6.0 percent, within the Bangko Sentral ng Pilipinas’ (BSP) 5.5- to 6.6-percent estimate for the month. If realized, it would be lower than the 6.2 percent recorded in July.
The projection is still well above the central bank’s 2.0- to 4.0-percent target and is also markedly higher than the 1.5 percent uptick seen in August last year.
Data for the month will be released by the Philippine Statistics Authority this Friday, Sept. 4.
With the lowest forecasts of 5.9 percent, Security Bank Corp. economist Angelo Taningco and HSBC Global Research senior economist Aris Dacanay said inflation could have slowed further despite higher food prices due to heavy rains and flooding.
Higher fuel prices would have also driven up transport costs, but “these were partly offset by lower prices in meat and electricity rates,” Taningco said.
ANZ analyst Kausani Basak, Sun Life Investment Management and Trust Corp. economist Patrick Ella and ING regional head of research Deepali Bhargava also said that inflation likely eased to 6.0 percent.
“We expect headline inflation in the Philippines to soften modestly amid lower retail fuel prices,” Bhargava said, but added that core inflation pressures “should remain elevated” with food inflation continuing to pick up.
Basak, meanwhile, said transport inflation likely eased from July but remained high year-on-year.
Food inflation could have continued to edge higher on the back of rising rice prices, she added.
“Going forward, inflation is expected to moderate but remain well above the Bangko Sentral ng Pilipinas’ target range,” Basak said.
“Further upside pressure to inflation could arise if El Niño drives up food prices.”
Ella, meanwhile, said he expected a “more moderating trend” in food items but some elevated prices for weather-sensitive items.
“Rice will still be muted over the month,” he said.
Union Bank of the Philippines chief economist Ruben Carlo Asuncion, Rizal Commercial Banking Corp. chief economist Michael Ricafort and Philippine National Bank economist Alvin Arogo all said inflation would have edged down to 6.1 percent in August.
Asuncion said rice likely remained the main driver of inflation and that prices of some food items would have risen as heavy monsoon rains disrupted deliveries and distribution.
“While inflation may remain elevated in the near term, we expect price pressures to gradually ease as supply conditions normalize and the effects of restrictive monetary policy continue to temper demand,” he said.
“Nevertheless, weather-related impact may continue to put pressure on inflation in the second half of the year,” he added.
Arogo and Ricafort said the likely decline would be mainly due to base effects.
“Nevertheless, the overall level of consumer price increase remains elevated due to high oil prices and the impact of recent weather disturbances on food commodities,” Arogo said.
With the highest forecast of 6.2 percent, Chinabank economist Domini Velasquez said inflation could have stayed unchanged amid continued upside risks.
She tagged elevated oil prices, a prolonged El Niño episode that could disrupt agricultural output, and the potential pass-through of higher minimum wages to consumer prices as likely to pressure consumer prices moving forward.
“However, we believe the BSP has delivered its final rate cut. Inflation is likely to remain elevated for the rest of the year and could accelerate further in Q4,” Velasquez said.
“Given that much of the remaining inflationary pressure is supply-driven, further monetary tightening would have limited effect in bringing inflation back to the BSP’s 2–4 percent target band this year.”
The central bank last Thursday raised key interest rates by another quarter-point to 5.0 percent, with BSP Governor Eli Remolona Jr. calling it a “preemptive move” against a severe El Niño and potential minimum wage hikes.
