Manila, Philippines - Inflation rose to a one-year high of 4.5 percent in April on the back of higher pump prices of petroleum products and more expensive power rates, the National Statistics Office (NSO) reported yesterday.
Last month’s inflation was faster than the 4.3-percent average recorded in March but was within the 3.7 percent to 4.7-percent forecast set by the Bangko Sentral ng Pilipinas (BSP). It was also the highest gain since April last year when consumer prices averaged 4.5 percent.
This brought the average inflation to 4.2 percent in the first four months of the year from 4.3 percent in the same period last year.
Core inflation, which strips out volatile food and fuel items, also accelerated to 3.8 percent in April from 3.5 percent in March.
Inflation, a growing concern across Southeast Asia due to rising food and energy prices and rebounding economies, is expected to exceed five percent in the coming months before taking off later in the year, the BSP said at its last policy meeting on March 24.
The fuel, light, and water (FLW) increased to 8.8 percent in April from 7.7 percent in March, followed by services that went up to 6.5 percent from 5.7 percent while housing and repairs (H&R) rose to 2.2 percent from 2.1 percent. The clothing index inched up to 1.9 percent from 1.8 percent while that of miscellaneous items went up by 1.2 percent from 1.1 percent.
The annual rate of increase in the heavily weighted food, beverages, and tobacco (FBT) eased to 4.2 percent from 4.4 percent.
“Except in FBT index, all the commodity groups posted higher annual rates,” the NSO said.
The NSO said inflation in the National Capital Region (NCR) climbed to 4.2 percent in April from four percent in March while inflation in areas outside NCR picked up to 4.6 percent from 4.5 percent.
Monetary authorities believed that inflation last April was well-behaved amid escalating prices of oil in the world market in light of the political tensions in Middle East and North African (MENA) states.
The BSP has set an inflation target of between three percent and five percent for 2011 to 2014. It has set an inflation forecast of close to the higher end of the target for this year and 3.4 percent for 2012.
Barclays Capital economist Prakriti Sofat said inflation last month came slightly above its 4.4 percent forecast and 4.3 percent market expectations.
“Since the start of the year inflation has surprised on the upside three times,” Sofat said as it sees inflation averaging 4.8 percent this year.
“We continue to expect headline inflation to average 4.8 percent in 2011, above the BSP’s projection of 4.4 percent and just shy of the top end of the three percent to five percent target band. Our sense is the headline inflation will exceed five percent by June,” she added.
Sherman Chan, economist of British giant Hong Kong and Shanghai Banking Corp., that inflation is expected to accelerate further in the coming months despite the slowdown in inflation for food.
“Philippine inflation accelerated in April, driven primarily by the core measure. Food inflation unexpectedly eased, but seasonally adjusted numbers suggest that momentum remains intact on a sequential basis. We expect inflation to further quicken in coming months, peaking only in September or October,” Chan explained.
According to Chan, headline inflation is expected to breach the central bank’s target band of three percent to five percent within the next two months as strong domestic demand continue to fuel inflationary pressures.
“We expect headline inflation to breach the central bank’s target band within the next two months. Upside risks to inflation are still emerging in the Philippines, particularly from the minimum pay review, which could see higher than expected wage growth intensifying inflation,” Chan added.