Inflation soars to 8% in November, beating forecasts

MANILA, Philippines (Updated 11:10 a.m.) — Filipino consumers did not get their much-needed respite from high prices last month after inflation quickened faster than expected in November.

At a briefing on Tuesday, the Philippine Statistics Authority reported that inflation surged 8% year-on-year in November. This was faster than the 7.7% recorded in the previous month and the highest print since November 2008, when the Global Financial Crisis affected inflation.

A BusinessWorld poll of 15 analysts had pegged last month’s inflation at 7.8%. However, the latest print still fell within the Bangko Sentral ng Pilipinas’ 7.4-8.2% forecast range for November.

Inflation, as measured by changes in the consumer price index, has proven painful for Filipinos in past months. A reopened domestic economy, coupled with expensive fuel prices and a weak peso, has forced consumers and businesses to grapple with the realities of rising living expenses.

Central banks, like the BSP, inject rate hikes to temper inflation within an economy. Ideally, rate hikes effectively control consumption, since higher interest rates would force consumers and businesses to think twice about borrowing money.

The Marcos Jr. administration’s economic managers forecast inflation would average 5.8% this year, meaning the government has conceded it would miss its 2-4% annual target this year. In the first 11 months, inflation averaged 5.6%.

The PSA reckoned that the prices of food and non-alcoholic beverages hit a milestone, rising 10% year-on-year in November from 9.4% in the previous month. Divina Gracia Del Prado, deputy national statistician, noted that vegetable prices were still reeling from the spillover effects of typhoons that flattened farmlands in the past months.

“The last time the prices of food and non-alcoholic beverages were at this level was back in September 2018. It amounted to 10.2%,” she said.

Broken down, prices of tomatoes (26%), ampalaya (bitter gourd, 17%), red onions (47.2%), and eggplants (23.6%) have risen compared to a year ago.

Meanwhile, data showed that price growth was already decelerating in the National Capital Region month-on-month to 7.5% in November due to lower utility costs. But prices were still surging in areas outside Metro Manila, as food prices such as rice and sugar are seen to be moving up.

December peak ‘unlikely’

Food prices remain a chief concern for Filipinos, as the holidays beckon. This is considered a season for “high spending” and with the domestic economy reopened, businesses could indeed make a killing. Indeed, ingredients for Noche Buena staples are on the rise.

“We’re seeing the effect of the Christmas season since the prices of butter, condensed milk, and cheese are rising. However, inflation does not always peak in December,” Del Prado said.

But economists like Nicholas Antonio Mapa of ING Bank in Manila expect inflation to peak this month, due to higher food prices.

“Demand side pressures remain potent with personal services and restaurants, and hotel inflation accelerating. Second-round effects to keep inflation elevated with prices expected to grind lower next year,” he said in a Viber message.

Michael Enriquez, chief investment officer at Sun Life Investment Management and Trust Corp., disagreed with Mapa’s assessment.

“The headline inflation may appear to be peaking, but we also need to look at core inflation,” he said in a Viber message.

Core inflation amounted to rose to 6.5% year-on-year in November, a far cry from the 2.4% clip recorded a year ago. Core inflation is often used as an indicator of the long term inflation trend as well as future inflation. The long-term inflation trend is primarily affected by demand conditions which, in turn, can be influenced by the BSP’s monetary policy.

“So given this, we may still see the peak to be pushed sometime the first quarter of 2023,” Enriquez added.

Leonardo Lanzona, an economist at Ateneo De Manila University, believes inflation’s peak is nowhere in sight, considering that the only weapon deployed by the government are interest rate hikes.

“Unfortunately, this is not enough since the inflation is caused by supply-side factors. The government does not seem to have the funds to make any substantial move towards removing these supply constraints,” he said.