Dissecting Data: Surging pork prices push inflation to 2-year high; NCR, poor among worst hit

Warren de Guzman and Edson Guido, ABS-CBN News

Posted at Feb 05 2021 06:54 PM | Updated as of Feb 05 2021 11:39 PM

Dissecting Data: Surging pork prices push inflation to 2-year high; NCR, poor among worst hit 1
Pork cuts and products on sale at a public market. Mark Demayo, ABS-CBN News/File

MANILA - Philippine inflation hit a 2-year high in January, at 4.2 percent, starting 2021 on a sour note for the economy.

The January inflation rate pierced above the 2- to 4-percent target range of the Philippine central bank.

Dissecting Data: Surging pork prices push inflation to 2-year high; NCR, poor among worst hit 2
ABS-CBN Data Analytics, Data from the Philippine Statistics Authority (PSA)

This chart by ABS-CBN Data Analytics shows that inflation has been on an uptrend for four months.

The latest figure from the Philippine Statistics Authority (PSA) is the highest recorded since January 2019, when inflation hit 4.4 percent.

Dissecting Data: Surging pork prices push inflation to 2-year high; NCR, poor among worst hit 3
ABS-CBN Data Analytics

Based on data available as of Feb. 5, the Philippines again recorded the highest inflation rate among major ASEAN economies.

Vietnam, Malaysia, Indonesia, Singapore and Thailand are all seeing much slower inflation. Some are actually in deflation, meaning prices in those countries are going down.

Dissecting Data: Surging pork prices push inflation to 2-year high; NCR, poor among worst hit 4
ABS-CBN Data Analytics, Data from PSA

Faster January inflation was driven by the uptick in meat and vegetable prices, largely due to the effects of typhoons late last year and the African swine fever outbreak.

Meat inflation shown in orange is on a steep ascent, while vegetable inflation in green has been high for the past few months.

Fish inflation in grey is back on an uptrend after a decline in December, and the inflation in rice is now in positive territory for two straight months. 

Dissecting Data: Surging pork prices push inflation to 2-year high; NCR, poor among worst hit 5
ABS-CBN Data Analytics, Data from PSA

Rising food and transport prices will also hurt the poor the most, as inflation for the country's bottom 30 percent -- the poorest of the poor -- of income households accelerated further to 4.9 percent in January.

This was also at a 2-year high since January 2019 when the inflation rate for the poorest 30 percent income households was at 5.2 percent.

Cagayan Valley (Region 2), had the highest inflation rate among the regions in January, at 8 percent. It had an inflation rate of 6.6 percent in December.

The Zamboanga Peninsula had the lowest inflation rate at 0.2 percent in January, which is slower compared to its 1-percent inflation in December. 

National Statistician Dennis Mapa said rising food prices have the potential to push overall inflation higher in the coming months.

"'Yung sources ng inflation nitong January at to some extent the 4 months, talagang nasa food commodity group, karne, isda, gulay. Ito ay malaki, ang weights ng apat na items na ito sa food basket. Sila ang nagdra-drive ng food inflation," he said.

(The sources of inflation this January, and to some extent the four months, is really the food commodity group including meat, fish, and vegetables. These have heavy weights in the food basket. They are driving food inflation.)

"Our assessment here is if these groups, particularly karne, isda, gulay prutas, kung tataas muli sa susunod na buwan (meat, fish, vegetables and fruits, if they rise again in the next month), there is high probability we will see higher inflation in the coming months," Mapa added.

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BPI lead economist Jun Neri said fuel prices will be another push factor for inflation.

"Just look at oil alone, we know this is going to keep rising. April 2020 oil was at $19 per barrel. Now, it is at $55 per barrel. That is a 200 percent increase that will have a knock-on effect," Neri said.

He noted that January’s 4.2 percent inflation shows how restrictions and distancing protocols can be very expensive on services, and how this could put the brakes on BSP Monetary policy cuts.

"In fact, given the high inflation— that’s expected to keep rising and an expected GDP [gross domestic product] recovery in the second quarter — a policy rate hike is now in the realm of possibility," the BPI economist said.

For his part, chief economist Michael Ricafort of RCBC Treasury Group hint at further spikes in several months in 2021 starting in March.

"Inflation could also mathematically pick up further starting March 2021 and in the coming months of 2021, and could remain at 4 percent levels, largely due to much lower base or denominator effects, with the first year anniversary of the COVID-19 lockdowns starting mid-March 2020," Ricafort said.

He said these prospective hikes could be offset by non-monetary measures such as the 60-day price ceiling on pork and chicken and increased importation of pork, chicken, and other meat products in the coming months.”

House Deputy Minority Leader and Bayan Muna Party-list Rep. Carlos Isagani Zarate sees that importation will not solve the price hikes and food security, saying it "would just make us more dependent on other countries."

"For us to have a more secure and stable economy we must increase support to our local farmers and producers especially in agriculture," Zarate said. 

Bangko Sentral Governor Benjamin Diokno viewed the latest data uptick as "transitory," keeping its 2- to 4-percent target for inflation for this year and next year.

"The projected uptrend in inflation is seen to be temporary. The sources of near-term inflation pressures are supply-side shocks in nature that should not require a monetary policy response unless they lead to further second-round effects," the central bank said.

Supply-side constraints are best solved by non-monetary interventions, the BSP said, such as measures to ease logistics bottlenecks and make commodities more available to the markets. 

BPI's Neri mentioned that the Philippines is at the risk of "stagflation" as inflation is high while the country's economic growth is slow, and the unemployment rate is high.

Asked if he sees "stagflation" materializing, the BSP governor said: "What stagflation? BSP projects inflation will settle within the 2- to 4-percent target range this year and next year.”

The BSP is set to meet on Feb. 11 for its first monetary policy decision this year.