December inflation surges to 6.6% : Highest rate in 19 months

Inflation surged to a 19-month high of 6.6 percent in December due to rising food and fuel prices and the sharp depreciation of the peso against the dollar, the National Statistics Office announced yesterday.

The NSO said for the whole of 2000, inflation averaged 4.4 percent, way below the government’s inflation target of five percent to six percent and significantly lower than the 1999 average of 6.7 percent.

The latest inflation rate was 0.6 percentage point higher than November’s six percent.

December’s inflation rate was broadly in line with the market’s consensus of 6.4 percent and better than the government’s forecast of around seven percent.

The Bangko Sentral ng Pilipinas (BSP) earlier forecast inflation to hover at around 6.5 to seven percent year-on-year due to the weak peso and higher oil prices.

Analysts expect inflation to trend higher in the first quarter of 2001 due partly to the impact of oil price increases last year and the weak peso. They said the ill effects of these twin developments haven’t been completely passed on to consumers.

Socioeconomic Planning Secretary Felipe M. Medalla said the inflation rate could hit eight percent by the end of March, after which it is expected to taper off.

For this year, Medalla expects inflation to average at 6.5 to 7.5 percent as the weaker peso and the effects of a mild El Niño phenomenon will create an upward pressure on prices. Medalla, however, noted that despite the occurrence of El Niño, prices will not rise significantly as the government will continue to import rice on a timely basis to maintain an adequate supply.

The government statistics office said December’s inflation was marked by a relatively sharp spike in food prices, which rose 5.2 percent after 4.5 percent in November, due to strong seasonal demand and the impact of recent typhoons causing supplies to tighten in some areas.

A string of oil-price hikes last year weighed on utility prices in December, which rose 12.5 percent from 10.8 percent in November. In the coming months, inflation is expected to increase due to the weak peso, which fell more than 20 percent against the dollar last year, high oil prices and a possible El Niño – related drought threatening agriculture production.

In Metro Manila, inflation was steady at 7.4 percent while in rural areas, the average inflation rate went up to 6.3 percent in December from 5.5 percent in November.

All regions posted higher inflation rates except for Western Mindanao which recorded a slowdown to 5.1 percent from 5.3 percent. The biggest increase was recorded in Southern Tagalog at 1.3 percentage points followed by Eastern Visayas at 1.2 percentage points.