November inflation of 7.1% nears year-low

The country’s inflation rate stayed near a year-low in November as fuel prices and housing costs eased, the National Statistics Office (NSO) reported yesterday.

The government statistics office said the nationwide inflation rate advanced to 7.1 percent in November, up slightly from seven percent the previous two months.

The November inflation figure was still within the Bangko Sentral ng Pilipinas’ (BSP) full-year target of 7.6 percent to 7.9 percent.

BSP Governor Amando M. Tetangco Jr. said the "BSP was watching out for any adverse shift in expectations and second-round effects as a result of price developments."

"Pressures from the value-added tax adjustment and other shocks could be muted by easing fuel prices and the appreciation of the peso especially if these favorable price trends are sustained," Tetangco added.

Analysts said a steady inflation may give the BSP room to hold off raising borrowing costs, helping spur spending and investment in the country.

A 4.2-percent gain by the peso against the dollar, which makes it Asia’s best performing currency this year, may help reduce import costs.

"A stronger peso, lower oil prices and weak economy will keep the central bank from increasing interest rates,’’ said

Sani Hamid, an economist at Forecast Ltd. in Singapore. "The slight increased in inflation isn’t too much of a concern.’’ Hamid expects inflation to average 7.7 percent this year, less than the BSP’s 7.9 percent estimate.

The government on Nov. 1 imposed a 10 percent value-added- tax on oil, power and other previously exempt products and services.

Consumer prices for fuel, light and water rose 14.5 percent, slowing from a 17.6 percent gain in October. Housing costs rose 4.1 percent, less than 4.4 percent in the previous month. Those of food, beverage and tobacco rose 6.3 percent, faster than the 5.9 percent gain in October. Services prices rose 10.9 percent from 10.4 percent.

Excluding selected food and energy items, the NSO said the core inflation further decelerated to 6.1 percent in November from 6.3 percent in October.

The inflation rate in the National Capital Region (NCR) slowed down by 0.9 percentage point to eight percent in November from 8.9 percent in October due to slower annual price gains in all the commodity groups except for food, beverage and tobacco.

Outside the NCR, the NSO said the inflation rate picked up to 6.8 percent in November from 6.2 percent in October as inflation for all the commodity groups except for housing and repairs (H&R) moved upward.

Tetangco said the BSP is expecting another price increases once holiday demand kicks in.

According to Tetangco, food supply picked up this month and relieved the pressure on the prices of food commodities, thus improving the outlook for the November inflation rate.

Tetangco said that although there was still residual inflationary impact from the increase in oil prices, the effect had begun to ease.