HIGHER food prices along with elevated transport and fuel costs could have driven inflation higher in May, analysts said.
The median forecast in a Manila Times poll was 7.8 percent, higher than the 7.2 percent recorded in April and within the Bangko Sentral ng Pilipinas’ (BSP) estimate of 7.1 percent to 7.9 percent for the month.
If realized, inflation will have risen for a fifth straight month but moderate from a two-month surge — blamed on the oil shock caused by the war in the Middle East — that began in March and saw the rate breach the BSP’s 2.0- to 4.0-percent target.
May data will be released by the Philippine Statistics Authority this Friday, June 5.
Last Saturday, the central bank said that rising rice, vegetable and meat prices, as well as a weaker peso, could have driven inflation up last month.
Fuel price rollbacks, lower fish prices and slightly lower power costs would have partially offset upside price pressures, it added.
Global prices feeding through
Moody’s Analytics economist Sarah Tan, who expects inflation to have eased to 6.5 percent, said higher global commodity prices, particularly energy and agricultural commodities, “continue to feed through into domestic transport and food costs.”
“These external price pressures have been amplified by ongoing Middle East conflict that have disrupted commodity markets and pushed up import costs,” she added.
Chinabank economist Domini Velasquez, meanwhile, said inflation likely stayed at 7.2 percent.
Pressure from higher gasoline and cooking gas prices, along with increased restaurant prices, would have been offset by lower prices of diesel, kerosene, rice, meat, vegetables, fruits and eggs, as well as lower electricity rates in Manila Electric Co.-serviced areas.
“Looking ahead, estimate headline inflation to remain around seven percent for the remainder of the year,” Velasquez said.
“Key upside risks include prolonged elevated oil prices, and second-round effects from rising energy costs.”
Emmanuel Lopez of the University of Santo Tomas Graduate School said inflation could have quickened to 7.3 percent “owing to the higher food prices, high gasoline prices plus the higher import costs leading to the continued depreciation of peso against the dollar.”
Pantheon Macroeconomics economist Miguel Chanco, who expects a rise to 7.5 percent, pointed to higher housing and utilities costs that had lagged global energy price movements.
“Offsetting part of this lift is likely to be a slip in food inflation, with rice prices showing more stability at the margin,” he said.
Persistent pressures
Union Bank of the Philippines chief economist Ruben Carlo Asuncion said inflation likely accelerated to 7.8 percent due to higher food prices, particularly for rice and protein products, as well as elevated transport and fuel costs.
“Seasonal supply constraints and the lagged pass-through of peso depreciation also continued to exert upward pressure on prices,” he added.
“Inflation is expected to stay elevated in the near term, keeping pressure on monetary authorities to maintain a cautious and data-dependent stance.”
Security Bank economist Angelo Taningco and ANZ Research chief economist Sanjay Mathur said inflation may have climbed to 7.9 percent.
“The higher ... inflation rate is partly driven by low base effect,” Taningco said.
“Between April and May, price hikes were still evident albeit at a slower pace across energy, transport and food items given that global oil prices have stabilized,” he added.
Mathur, meanwhile, said “unfavorable base effects and elevated fuel and food prices over the month likely led to the higher prices.”
“Significant peso weakness also added to the inflationary pressures,” he added.
With the highest forecasts of 8.0 percent, Rizal Commercial Banking Corp. chief economist Michael Ricafort and Philippine National Bank economist Alvin Arogo said persistent supply shocks would have pushed inflation higher in May.
“Inflation could pick up further in the coming months in view of second-round inflation effects or higher prices of other affected goods and services,” Ricafort said.
‘No need’ for off-cycle hike
Arogo, meanwhile, said “there is no need for the BSP to implement an off-cycle hike.”
“Addressing second round effects through more expensive borrowings may do more harm than good since both consumer and business confidence are already impaired as the first quarter GDP (gross domestic product) data has shown,” he added.
BSP Governor Eli Remolona Jr. earlier in May said that monetary authorities could hike interest rates ahead of this month’s scheduled policy meeting, saying in a television interview that “it’s a toss-up whether we do an off-cycle, or we just wait for the regular meeting.
The central bank raised its key interest rate to 4.50 percent last April 23 to keep a lid on inflation. The 25-basis-point rate hike, Remolona said, “didn’t seem enough,” adding that policymakers were facing a big and persistent supply shock.
“Whatever we do, we want to convey the message that we’re trying to be proactive,” he added. “We’re trying to stay ahead of the curve and that we’re serious about inflation.”
The next policy meeting will be on June 18.