Inflation reaches 5.4% in June due to rising prices

Consumer prices rose to 5.4 percent in June, exceeding official and many private projections as oil price hikes triggered a sharp rise in prices of basic commodities, the National Statistics Office (NSO) reported yesterday.

The inflation rate in May stood at 4.7 percent. Private sector analysts had widely expected inflation in June to rise to about five percent while government projections had placed it at under five percent.

National Economic and Development Authority (NEDA) Director General and Socioeconomic Planning Secretary Romulo Neri, however, downplayed the latest increase in inflation, saying that "we are still well within range of the target of four to five percent" for this year while adding that price increases would soon slow.

He attributed the higher inflation in May to sharp increases in meat prices and increased transportation costs due to the higher price of fuel, which were stabilizing or starting to go down.

"We don’t think that what happened (in May) will happen again," Neri said.

Song Seng Wun, regional economist at GK Goh Securities in Singapore, concurred with Neri, saying that "since oil prices have already peaked, this uptrend in inflation is likely to be transitory and we still expect the full-year rate to settle at around 4.6-4.7 percent."

The inflation rate for the six-month period stood at 4.3 percent. The government has projected the full-year inflation rate at four percent to five percent.

The latest figures are estimated under a new system using 2000 as the base year for prices. Under the old system, using 1994 as the base year, inflation in June would be at 5.1 percent.

Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura said that even with the sharp acceleration in June, the average inflation rate for the six-month period of 4.3 percent is still within the full-year target.

"We’re still on track, this will not necessarily mean we will have to do anything with our monetary policies," Buenaventura said.

Buenaventura said that despite the June number, the headline inflation was still benign and there will be no need for the Monetary Board to touch policy rates.

Buenaventura said monetary policies are likely to stay where they are as long as the inflation rate stayed benign especially since the approved increase in minimum wages was below the P22 supported by the BSP.

The BSP earlier said that beyond the P22 level, the increase in the daily minimum wage would have an impact on the national average inflation especially when combined with the approved increase in transport fares and utility charges.  

The NSO said the uptick in the headline inflation in June was mainly due to higher prices of food items, particularly, meat, fruits, vegetables, daily products and cooking oil which exerted the most pressure on headline inflation.

The impact of these supply-side factors, however, was expected to be transitory, Buenaventura said. "They don’t appear to represent a permanent shift in the long-run price path," he said. "These risks are for the most part, outside the influence of monetary policy."

In addition, Buenaventura said the potential supply-oriented price pressures are likely to be tempered by continued presence of spare capacity in the manufacturing sector and soft labor market conditions. The pending petitions for wage adjustments could also raise inflation expectations. 

Buenaventura said the timely importation of food products such as chicken and corn could help ease the pressures on food prices.