A market vendor arranges various vegetables at Quinta market in Manila, Sept. 19. Vegetable prices continued to rise in November. — PHILIPPINE STAR/EDD GUMBAN
RISING FOOD PRICES pushed inflation to a 14-year high in November, the Philippines’ Statistics Agency (PSA) said on Tuesday.
Preliminary data from the Philippine Statistics Authority (PSA) showed that headline inflation accelerated by 8% in November, the highest since it hit 9.1% during the global financial crisis in November 2008.
The latest print was faster than the 7.7% in October and 3.7% in November 2021. It was also higher than the median estimate of 7.8% in a BusinessWorld poll of 15 analysts conducted last week, but within the forecast range of 7.4-8.2% of Bangko Sentral ng Pilipinas (BSP).
November inflation also broke through GNP’s target range of 2-4% for the eighth straight month.
President Ferdinand R. Marcos, Jr. said Tuesday that while economic growth is healthy, inflation is “wild and out of control.”
“Unfortunately, the main drivers of this inflation are still imports… So import substitution is still a good idea, not only for foreign exchange reserves, but also so that we can keep our inflation rate low,” he said in a speech at the Arangkada Philippines Forum after the release the inflation data.
For the January-November period, inflation averaged 5.6%, faster than the 4% for the same period a year ago. However, that was still below BSP’s full-year forecast of 5.8%.
Month on month, the consumer price index (CPI) increased by 0.9%. Excluding seasonal effects on prices, inflation fell by 0.7% in November from 1% in October.
Core inflation, which factors in volatile food and fuel prices, rose 6.5% in November from 5.9% in October and 2.4% in November 2021. Over the 11 months to November, core inflation averaged 3.7 %.
Divina Gracia L. Del Prado, senior PSA officer and assistant national statistician, said at a briefing that inflation accelerated in November due to the rise in food prices, reflecting the spillover effect of the typhoon that hit the country in late October have. Severe Tropical Storm Paeng (international name: Nalgae), which caused about Pta 6.4 billion in damage to agriculture.
The heavily weighted food and non-alcoholic beverages index rose 10% in November from 9.4% in the previous month. This was the fastest rise in food inflation since September 2018.
“Higher prices for vegetables, fruit and rice were the result of lower production caused by the onslaught of typhoons and higher production costs. Similarly, sugar production is still suffering from damage caused by recent typhoons,” the National Economic and Development Agency (NEDA) said in a separate statement.
Vegetable inflation rose 25.8% in November (from 16% in October), while sugar, confectionery and desserts rose 38% (from 34.4% in October). Rice prices rose 3.1% versus 2.5% in the previous month.
Another driver of November inflation was the Restaurant and Lodging Services Index, which rose 6.5% in November from 5.7% in the previous month, reflecting continued “revenge spending” by Filipinos.
Out of 13 commodity groups, 10 reported faster inflation in November, including alcoholic beverages (10.6% vs. 10.4% in October), clothing and footwear (3.6% vs. 3.1%), home furnishings and appliances (4.5 % vs. 3.8%) and health (2.8% from 2.6%).
On the other hand, slower growth rates were observed for housing, water, electricity, gas and other fuels (6.9% compared to 7.4% in October); and transport (12.3% from 12.5%).
Ms Del Prado said pump price increases had started to slow in November.
“Inflation is slowing for petroleum products. So if we see the impact of food prices (slowing down), it could lower (headline) inflation,” she said in a mix of English and Tagalog.
PSA data showed that inflation for households in the bottom 30% still using 2012 prices rose to 7.7% in November – the highest since October 2018. This was faster than the 7, 3% in October and 4.2% last year.
For the 11-month period, the average inflation for this income bracket was 5.1%.
“The government is continually introducing targeted subsidies and rebates to mitigate the impact of higher prices for essential goods, particularly for the vulnerable sectors and low-income earners of our society,” said Secretary of Socio-Economic Planning and NEDA Chief Arsenio M. Balisacan in a Expression.
Inflation in the National Capital Region (NCR) slowed to 7.5% in November, from 7.7% in October and 2.2% a year ago.
Outside of NCR, consumer prices rose 8%, from 7.6% in October and 4% in the same month of 2021.
INFLATION TO SLOW DOWN
Ms Del Prado said inflation could rise by as much as 8.5% in December to meet GNP’s full-year forecast of 5.8%.
“If the headline (inflation) is lower, then average inflation for the year should also be lower,” she said, adding that inflation doesn’t always peak in December.
The Development Budget Coordination Committee (DBCC) on Monday also raised its average inflation rate assumption to 5.8% this year from 4.5-5.5%.
“Inflation is expected to slow in the coming months as global oil and non-oil prices, negative base effects and the impact of cumulative GNP interest rate adjustments weigh on the economy,” the central bank said in a statement.
The BSP said it “remains ready to take any further monetary policy action needed to bring inflation back on track on target over the medium term”.
The BSP has raised interest rates by 300 basis points (bps) to 5% since May in a bid to curb rising inflation. The last meeting of the Monetary Board for the year is December 15th.
Treasury Secretary Benjamin E. Diokno said in a separate statement that inflation is expected to ease through the second half of 2023, averaging between 2.5% and 4.5%.
Bank of the Philippines chief economist Emilio S. Neri, Jr. said November’s inflationary pressures show that food supplies continue to push inflation amid supply problems in the agricultural sector and the impact of recent typhoons.
“Food distribution remains expensive amid high oil prices… Although oil prices have stabilized recently, pressure on consumer prices may not ease until the second half of 2023,” he said in a note.
Despite faster printing in November, Mr Neri said inflation could be nearing its peak.
“We expect a decline in the coming months, mainly due to the recent stabilization in oil prices,” he said. “Given the inflation outlook, there is a compelling reason for BSP to continue raising interest rates.”
In a note Tuesday, Nicholas Antonio T. Mapa, senior economist at ING Bank NV Manila, said headline inflation could still peak in December and slow in January, but inflation will not slow as quickly as it did in 2018 .
“We believe inflation will be lower and not repeat the rapid slowdown we saw in 2018. High inflation has ‘infected’ around 60% of the CPI basket, which tells us that price pressures are now broader,” he added.
Mr Mapa said the BSP is likely to remain hawkish at its meeting next week.
“Demand-side pressures remain evident after items related to ‘revenge spending’ experienced faster inflation. Therefore, we expect BSP to implement a 50bp hike next week or get a rate hike from the Fed,” Mr Mapa said. — Keisha B. Ta-asan