Secretary of Commerce Ruth B. Castelo checks the prices of Noche Buena products at a supermarket in Manila, December 2. — PHILIPPINE STAR/EDD GUMBAN
By Keisha B. Ta-asan, reporter
INFLATION accelerated in November likely for the eighth consecutive month above Bangko Sentral ng Pilipinas (BSP) target, mainly on higher priced groceries and higher electricity tariffs, analysts said.
A survey of 15 analysts conducted by BusinessWorld last week gave a median estimate of 7.8% for the consumer price index (CPI) in November, up from 3.7% a year earlier and 7.7% in October.
If realized, November would mark eight straight months in which inflation breached GNP’s annual target range of 2-4%, and the fastest in 14 years or since the 9.1% print in November 2008.
The headline inflation figure will also coincide with the 7.8% midpoint of the 7.4-8.2% GNP forecast for the month.
The Philippine Bureau of Statistics will release inflation data on December 6th.
“For November, our inflation forecast is 7.8% as we still see elevated food prices due to food shortages due to weather disruptions in October and early November,” said Patrick M. Ella, economist at Sun Life Investment Management and Trust Corp in an E -Mail.
Agriculture has borne the brunt of several weather disruptions this year. Severe Tropical Storm Paeng (international name: Nalgae) caused over 6.4 billion pesos in agricultural damage and led to the declaration of a six-month “state of disaster” in Calabarzon, Bicol, Western Visayas and Bangsamoro Autonomous Region in Muslim Mindanao.
National Bank of the Philippines economist Alvin Joseph A. Arogo, who forecast 7.9%, noted that these four regions together contribute 27% of the country’s agriculture, forestry and fisheries industries.
“Therefore we have planned higher price growth for food and non-alcoholic beverages in November and December. In the meantime, we continue to reflect our view in our forecasts that the second-round impact of global commodity surge and the impact of peso depreciation are likely to be felt in the near term,” said Mr. Arogo.
Standard Chartered Bank economist Jonathan Koh said in an email that utility inflation likely rose in November after Manila Electric Co. (Meralco) hiked electricity prices.
Meralco increased the total tariff for a typical household by P0.0844 to P9.8628 per kilowatt hour (kWh) in November.
“These upward pressures are offset by declines in oil and pork prices, peso appreciation and base effects,” said Robert Dan J. Roces, chief economist at Security Bank Corp., in an email.
In November alone, pump price adjustments amounted to a net decrease of P7.5 per liter for diesel and P4 per liter for kerosene. Meanwhile, gasoline prices posted a net increase of P0.8 per liter for the month.
The peso also rallied to 56 pesos to the dollar in November and closed the month on November 29 at 56.56 pesos, up 1.41 pesos, or 2.5%, from its close of 57.97 pesos on October 28 corresponds.
However, China Banking Corp. chief economist Domini S. Velasquez said core inflation is still on the uptrend and could peak in the first quarter of 2023.
“Our latest estimate shows that core inflation could have risen to 6.1% in November from 5.9% in October. This means that overall secondary round effects continue to drive higher prices,” she said.
Mr Roces also said strong local consumption may have boosted core inflation in November.
Core inflation, which excludes food and fuel prices, accelerated to 5.9% in October from 5% in September.
PEAK IN DECEMBER?
Meanwhile, headline inflation is likely to peak in December before decelerating in 2023, analysts said.
“We believe inflation has not yet peaked and expect inflation to rise to around 8% in December and 5.8% on average for 2022,” said Makoto Tsuchiya, associate economist at Oxford Economics, in a statement E-mail.
Ms Velasquez said prices for holiday items “are at risk of another peak”. “We hope that this December the government can monitor and prevent unnecessary price increases,” she added.
Ms Velasquez said inflation could settle in its forecast range of 7.7-7.9% in December before easing in 2023.
The Department of Trade and Industry (DTI) said last month that prices of many foods considered by Filipinos as Christmas staples rose 1% to over 10% ahead of the holiday season. These products include ham, spaghetti pasta and sauce, quezo de bola, and fruit cocktail.
“We expect inflation to peak at 8.1% in December and should start falling again from January next year. We continue to monitor the factors that are likely to drive inflation, particularly the increase in food prices caused by higher fertilizer prices and typhoon damage,” Mr Arogo said.
Meanwhile, Mr Roces said he expects the BSP to hike interest rates by 50 basis points (bps) at its December 15 meeting, “with room to do more in (Q1 2023) until inflation picks up.” cools down”.
GNP Governor Felipe M. Medalla said in an interview with Bloomberg TV that the Monetary Board is likely to be divided on whether interest rates should be raised by 25 or 50 basis points.
“Obviously we won’t do zero and I can’t speak for the rest of the board. But I think board members will probably be divided on whether to make 25 or 50,” he said.
Federal Reserve Chair Jerome H. Powell signaled last week that it was time to slow the pace of upcoming rate hikes. The Fed is now widely expected to hike rates by 50 basis points at its December 13-14 meetings, adding to the cumulative 375 basis points it has delivered since March to tame inflation.
“With the holiday season approaching, seasonal produce prices are expected to rise, but headline inflation is expected to slow towards the end of the year due to tighter GNP monetary policy controls,” De La Salle University economist Mitzie Irene P. Conchada said in an E -Mail.
BSP has hiked interest rates by a total of 300 basis points to 5% since May in a bid to curb inflation.
“Looking ahead, we expect inflation to slow as supply-side shocks and non-monetary measures to contain inflation ease,” Mr Koh said.
He added that the effectiveness of non-monetary measures will need to be monitored going forward.